Key factors in selecting Comparables: 

 

1. Location:

Proximity to the subject property is a dominant factor. Comps for properties need to be in or near the same neighborhood or a comparable area. Limiting the search to a quarter to half-mile radius is a common practice 

  

2. Age:

Homes of similar construction and styles are preferred. Recent sales of homes of similar age are generally better comps than older properties. 

  

3. Style and Lot Size:

Like homes are the best comparbales. Single-story homes should be compared to other single story homes, and bi and tri-level homes to other bi and tri-level homes. Lot size should also be comparable. 

  

4. Bedrooms and Bathrooms:

The total number of bedrooms and bathrooms should be as close as possible to the subject property

  

5. Zoning and Neighborhood Features:

Properties with like zoning and in the same neighborhood or a competitive market area are preferred. 

  

6. Timeframes:

Recent sales (ideally within the last 3-6 months) are preferred, but older sales may be used if they are the best available comparable, usually not more than a year. 

  

7. Size (Square Footage):

The size of the comparable property (in square footage) should be reasonably close to the subject property (within 20-25%) 

  

8. Highest and Best Use:

The comparable property should have the same highest and best use as the subject property. 

  

9. Condition:

The condition of the comparable property should be similar to the subject property. 

  

10. Bracketing:

Appraisers may use the "bracketing" method, which involves selecting comparables that are both better and worse than the subject property in terms of certain characteristics, to help bracket the estimated value. In relative terms, it’s like taking average. 

  

11. Improvements (Updates and Features):

Current updates to the property vary from interior to exterior and it a very important to know what has been done to the property. New Kitchens and bathrooms, new HVAC and new roofing are among the most important. Additionally, a pool or a finished basement are on the list of prime importance. Each of these have value impact.

 

12. Poor Comparables:

• Bad comparbles lead to big errors in pricing real estate. Avoid basing your price on the following:

• Properties that are significantly different in size or location from the property being valued. If you are trying to value a small apartment in a central location, the value of a large suburban home is meaningless.​

• Properties that are in very different condition. If your home is well-maintained with good but not spectacular finishes, don't look at homes that need work or have recently installed high-end appliances.

• ​Properties that were sold more than a year ago. The real estate market moves fast.

• ​Properties in significantly different locations. If your home is in a hot neighborhood, comparing the prices of homes in a declining area isn't helpful.

 

The Bottom Line

The use of comparables helps to put an accurate price tag on a home for sale It involves finding the closest possible matches to the asset being valued and adjusting for variables that make it more or less valuable than its peers. 

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Use these comparable criteria when determining how much to purchase a property for and ultimately its's ARV.