Comparables are homes of similar size, age, location and condition that have recently sold or are listed for sale. By finding comparable sales, the market value of a home can be estimated.
Selecting accurate comparables is key to establishing a realistic market value for a home. Here are some key characteristics for an accurate comparable:
Location – Comparable homes are in the same neighborhood, generally less than a mile radius in urban areas. Where neighborhood boundaries and home characteristics are distinct, comparables should stay in the same neighborhood, even if the distance is close.
Age & Style – A comparable home is of a similar age, though remodeling needs to be accounted for. More importantly, homes should be of the same style. A 1960’s split-entry is not an appropriate comparable for a 2010 two-story down the street.
Size – A comparable home should have a similar living sq ft, generally +/- 20% of the home being compared. Above grade living space is more valuable than finished basements and also needs to be factored in. A home with 2000 sq ft of living space where 1000 sq ft is a finished basement is worth much less than a home that has 2000 sq ft above grade.
Bed & Bathroom Count – A comparable should have a similar number of bedrooms and bathrooms. Adjusting for an extra bed or bath is OK, but trying to adjust for 3 more bedrooms is difficult.
Views – Adjusting for views and waterfront access is difficult. Comparables should have similar views and waterfront characteristics to the property being evaluated.
Condition – Comparable homes should be of similar condition and finish levels.
Lot Size – Small differences in lot size rarely impact property value, but comparables should not have wildly different lot sizes.
Sale Date – Market conditions change frequently. The best comparables have sold in the last 3-6 months. Comparables sold more than a year ago are of little value in determining current market conditions for a home.