Comparable sales in real estate are the actual prices paid for similar homes recently sold nearby, used to estimate what a given property is worth. Buyers, sellers, agents, and appraisers rely on these “comps” to anchor a value in real transactions rather than guesswork. The target is fair market value: the price a knowledgeable buyer and seller would agree on in an arm’s-length deal, where neither is under pressure and both have the same information.1Legal Information Institute. Wex – Arm’s Length
What Makes a Sale a Valid Comp
Not every recent sale counts. A useful comp is a property that would compete for the same pool of buyers as the subject home, with similar physical characteristics in the same market area.2Fannie Mae Selling Guide. Comparable Sales The closer the match on location, timing, and features, the less adjustment the comp needs, and the more trustworthy the resulting value.
Location
Values shift street by street, so proximity matters. Appraisers measure straight-line distance and direction from the subject to each comp and report it precisely, such as “1.75 miles NW.”2Fannie Mae Selling Guide. Comparable Sales There is no universal cutoff. Many appraisers use one mile as a practical starting point in suburban markets. In dense urban neighborhoods a half-mile may be the outer limit; in rural areas with sparse sales, appraisers routinely look further.
Timing
Comps that closed within the last 12 months are the standard. The most recent sale is not automatically the best one. A nine-month-old sale that closely matches the subject can beat a one-month-old sale that needs heavy adjustments. In slow markets or thinly traded areas, older sales are acceptable if the appraiser explains why.2Fannie Mae Selling Guide. Comparable Sales
Physical Similarity
Match property type first: single-family detached against detached, condo against condo. Then focus on finished living area, room count, style, and condition.2Fannie Mae Selling Guide. Comparable Sales A three-bedroom ranch is a poor comp for a five-bedroom colonial because those homes attract different buyers at different price points. Lot size matters too, especially where land carries a significant share of value.
Every appraisal must include at least three closed comparable sales. If the subject property itself sold previously, it can serve as a fourth comp, and active listings or pending contracts can be used as supporting data to show current market direction.2Fannie Mae Selling Guide. Comparable Sales
Sales to Exclude From Your Analysis
Some transactions do not reflect what the open market would pay, and including them distorts the result. The common thread: buyer and seller were not acting independently, were not fully informed, or were not exposed to normal competition.
- Sales between related parties. Transfers between family members, friends, or business partners often carry discounted prices or favorable terms that do not reflect the market.
- Distressed sales. A homeowner selling under foreclosure pressure or financial distress typically accepts a price well below what an orderly sale would bring.
- Off-market transactions. Properties sold directly between parties without public listing never faced competitive offers, so the price may not represent real demand.
- Unusual financing. A seller-financed deal with terms unavailable on the open market, such as a zero-interest loan, inflates the apparent price because the buyer is really paying for the financing concession.
Appraisers are expected to verify that each comp is an arm’s-length transaction before relying on it.1Legal Information Institute. Wex – Arm’s Length If you are pulling comps yourself, apply the same filter. One outlier can shift your value estimate by tens of thousands of dollars.
Where to Find Sales Data
The most complete source is the Multiple Listing Service (MLS), which records listing details, final contract prices, days on market, and seller concessions. Real estate agents have direct MLS access. Buyers and sellers can ask their agent for a data export or use consumer-facing platforms that pull from MLS feeds.
Public records from county recorder or tax assessor offices are the second layer. Recorded deeds confirm the legal transfer and the price paid, which is useful for catching sales that never appeared on the MLS: estate sales, for-sale-by-owner deals, and investor transactions. Access fees vary by jurisdiction; some counties run free online portals and others charge per document.
Watch for Seller Concessions
When reviewing raw sales data, look at seller concessions, meaning contributions the seller makes toward the buyer’s closing costs. Concessions inflate the headline sale price because the buyer effectively paid less than the recorded number for the property itself. Fannie Mae caps these financing concessions based on the lower of the sales price or appraised value, with limits that depend on the buyer’s down payment and property type:
- Greater than 90% LTV (less than 10% down): maximum 3% of the sales price.
- 75.01% to 90% LTV: maximum 6%.
- 75% or less LTV: maximum 9%.
- Investment properties: maximum 2% at any LTV.
Concessions above these limits must be deducted from the sales price when calculating loan ratios.3Fannie Mae Selling Guide. Interested Party Contributions (IPCs) When a comp involved large seller concessions, adjust its sale price downward by the concession amount to get a cleaner read on what the buyer actually paid.
Adjusting Comps for Differences
No two homes are identical, so the real work is adjusting each comp’s price to reflect what it would have sold for if it matched the subject exactly. Adjustments always happen to the comp, not the subject. If a comp has a feature the subject lacks (a finished basement, a third garage bay), subtract that feature’s estimated value from the comp’s price. If the subject has something the comp lacks, add it.
Base Adjustments on the Market
Fannie Mae is explicit that adjustment amounts must reflect actual market reactions, not arbitrary figures. An appraiser who defaults to a $5,000 bathroom adjustment in every report regardless of market is not doing the analysis correctly. The adjustment should come from paired sales analysis or other market evidence showing what buyers in that area actually pay for the feature.4Fannie Mae Selling Guide. Adjustments to Comparable Sales Individual feature adjustments commonly range from a few thousand dollars to $15,000 or more, but the number depends entirely on the local market.
There are no official caps on how large adjustments can be. Fannie Mae has stated it does not impose specific net or gross adjustment limits, and the dollar amount of adjustments alone should never determine whether a comp is acceptable.4Fannie Mae Selling Guide. Adjustments to Comparable Sales Still, a comp that needs very large adjustments is inherently less reliable than one that closely matches the subject. When reconciling several comps into a final value, give more weight to the comp that needed the fewest and smallest adjustments.
Time Adjustments
If local prices moved between the comp’s sale date and the effective date of the analysis, account for that shift. Time adjustments can be supported by home price indices, paired sales analysis, statistical modeling, or other accepted methods, and the appraiser must document sources and methodology in the report.4Fannie Mae Selling Guide. Adjustments to Comparable Sales In a market appreciating at 5% annually, a comp that sold eight months ago might warrant a 3-4% upward time adjustment, which is meaningful on a $400,000 home.
Comps vs. Zestimates vs. Tax Assessments
Two other numbers get confused with comparable sales, and both are weaker signals of market value.
Online tools like Zillow’s Zestimate and Redfin’s estimates use automated valuation models (AVMs) that analyze public records, tax data, and MLS feeds to generate instant property values. They are useful for a ballpark. They also have real blind spots. AVMs cannot inspect a property, so a cracked foundation, a gut-renovated kitchen, or a leaking roof does not show up, and any of those can swing value by $20,000 or more. Renovations often do not appear in public records for months or years. In rural areas with few sales, AVMs may rely on comps that are years old or miles away. Custom-built homes and mixed-use properties confuse the models further. Well-calibrated AVMs in active suburban markets can achieve median errors of 3% to 7%, but for lower-confidence properties errors can exceed 15% to 20%. About 15% of residential properties will continue to require traditional appraisals because of unique or remote characteristics, even as AVM technology improves.5FDIC. Quality Control Standards for Automated Valuation Models
Tax-assessed value is a different animal again. Assessments are generated by a local assessor’s office using formulas set by state law, and many states cap how much the assessed value can increase each year. California limits annual increases to 2% or the current inflation rate, whichever is lower, so a home purchased decades ago may carry an assessed value far below what it would sell for today. Market value reflects what a buyer would pay now given current supply, demand, interest rates, and recent comps. If the assessed value is $150,000 below recent sale prices, the assessment formula has not caught up with the market. When pulling comps or reviewing an appraisal, rely on actual transaction prices, not assessed values.
One more waiver worth knowing: Fannie Mae offers “value acceptance,” effectively an appraisal waiver, for certain low-risk transactions on one-unit properties valued under $1,000,000 when the automated underwriting system determines enough data supports the value. Investment properties, multi-unit buildings, manufactured homes, and construction loans are never eligible.6Fannie Mae Selling Guide. Value Acceptance
When the Appraisal Comes in Below the Contract Price
Roughly 10% of home appraisals come in below the contract price. The lender will only finance based on the appraised value, which creates a gap the buyer has to bridge. This is where comp analysis stops being academic.
The Appraisal Contingency
An appraisal contingency in the purchase contract gives the buyer a contractual exit if comps do not support the agreed price. With one in place, you can renegotiate the price, cover the gap with a larger down payment, or walk away and recover your earnest money deposit. Without one, you are obligated to close at the original price regardless of what the appraisal shows.
Requesting a Reconsideration of Value
If you believe the appraisal missed relevant comps or contains errors, you can request a reconsideration of value (ROV). Fannie Mae requires every lender to have a formal ROV process and to disclose it to borrowers when the appraisal report is delivered. Only one borrower-initiated ROV is allowed per appraisal, and it cannot be submitted after the loan closes.7Fannie Mae Selling Guide. Appraisal Quality Matters
An ROV request must identify specific deficiencies and provide supporting evidence, including up to five additional comparable properties with MLS listing numbers and an explanation of why those comps better support the value. Disagreeing with the number is not enough. The lender cannot request a value change “solely on the basis that the opinion of market value does not support the proposed loan amount.”7Fannie Mae Selling Guide. Appraisal Quality Matters This is where your own comp research earns its keep. If you found legitimate sales the appraiser overlooked, package them with clear explanations of why they fit.
CMAs, Formal Appraisals, and What They Cost
The same comp data serves different roles depending on who is using it.
Real estate agents prepare a comparative market analysis (CMA) to help sellers set a listing price or help buyers evaluate an asking price. A CMA is informal. There is no standardized format, no licensing requirement, and no regulatory oversight. It is a pricing tool, not a valuation document, and its quality tracks the agent’s judgment in picking and adjusting comps.
Lenders require something more rigorous. For federally related mortgage transactions, appraisals must be in writing, follow uniform standards, and be performed by individuals whose competency has been demonstrated.8Office of the Law Revision Counsel. 12 USC 3331 – Purpose The standard form for single-family homes is the Uniform Residential Appraisal Report, and every appraisal must comply with the Uniform Standards of Professional Appraisal Practice (USPAP).9The Appraisal Foundation. USPAP Complex residential appraisals on properties valued above $400,000 must be performed by a state-certified appraiser, and all transactions of $1,000,000 or more require state certification regardless of complexity.10eCFR. 12 CFR 34.43 – Appraisals Required; Transactions Requiring a State Certified Appraiser If the appraisal comes in low, the lender may deny the loan, reduce the approved amount, or require a larger down payment to close the gap.
Professional residential appraisals typically cost between $300 and $600 for a standard single-family home, with variation by location and property complexity. Multi-unit properties and rural homes where comps are scarce tend to run higher. The buyer usually pays the fee, and it is due whether or not the loan closes.
Manipulating comps to inflate an appraisal is not just an ethical issue. Making false statements in connection with a loan from a federally insured institution is a federal crime under 18 U.S.C. ยง 1014.11Office of the Law Revision Counsel. 18 USC 1014 State licensing boards can also revoke an appraiser’s credential for USPAP violations.