Selecting & Verifying Comps
~11 min read · Choose comparables by competitiveness, then verify facts with a party to the sale.
The sales comparison approach lives or dies at selection: comparables must be competitive substitutes, recently sold, arm's-length, and VERIFIED — because a comp built on a distorted price poisons every adjustment that follows.
Competitive substitution
A comparable is a property the subject's buyer would genuinely have considered instead: same market area (or competing one, with adjustment), similar size, age, quality, style, and appeal, similar HBU. Elements of comparison beyond the physical: property rights conveyed (fee simple vs leased fee), financing terms, conditions of sale, expenditures immediately after purchase, market conditions, location. Recency matters more in moving markets; three good comps beat six mediocre ones, and the best comp is the one needing the fewest adjustments.
- Would the subject's buyer have bought it? That's the test
- Match rights, financing context, market, physical traits
- Fewest-adjustments comp = most reliable comp
Arm's-length screening
Usable sales are arm's-length: informed, unrelated parties, typical motivation, adequate exposure. Screen out or heavily adjust: family and related-party transfers, foreclosure/REO and short sales (duress pricing — usable only where they ARE the market, stated and adjusted), auction sales, sales with atypical concessions (seller-paid costs inflating price), quick-sale duress, and portfolio/bulk transactions. 'Conditions of sale' adjustments handle documented atypical motivation — but a badly distorted sale is better discarded than adjusted.
- Arm's-length: informed, unrelated, typically motivated, exposed
- REO/short sales: duress-priced; use only with market support
- Concessions adjust dollar-for-dollar-effect first
Verification
Verify with a party to the transaction — agent, buyer, seller, closing attorney — plus records: confirm price, concessions, financing, condition at sale, personal property included, and motivation. MLS remarks and public records start the file; conversations finish it. USPAP's credibility standard makes verification part of scope of work — 'the MLS said so' is not verification when a sale anchors the value.
Worked example
Four candidate comps for a standard suburban ranch: (A) same model, one street over, closed 2 months ago — MLS notes '$12,000 seller credit to buyer'; (B) identical house sold by a father to his daughter, priced $60,000 under the range; (C) a bank REO two blocks away, sold as-is with rushed marketing; (D) a similar home in the competing subdivision across the arterial, clean sale, 3 months old. Build the comp set.
(A) Best comp — nearest substitute, recent — but the $12,000 concession likely inflated the nominal price: verify with the agent, adjust for the concession's price effect FIRST, then use. (B) Related-party transfer: not arm's-length, price reflects kinship, not market — discard (never 'adjust' $60,000 of family discount). (C) REO: duress pricing and as-is condition — discard in a healthy market; only where distressed sales dominate the segment would it enter, labeled and adjusted. (D) Usable — competing area with a location adjustment if the paired data supports one. Final set: A (adjusted), D, plus a further verified clean sale — and every use of A documented through verification, not MLS remarks alone.
Common exam pitfalls
Adjusting the unadjustable.
Family transfers and heavy-duress sales aren't 'adjusted' into comps — distortion you can't quantify is grounds to discard.
Ignoring concessions because the price 'is the price.'
Seller-paid credits inflate nominal prices — adjust for their effect on price before anything else.
Verifying by MLS printout.
Verification means a party to the deal confirms price, terms, condition, and motivation.
Would they have bought it, was it a real sale, did somebody confirm it — substitute, screen, verify.
Recap
- Comps = competitive substitutes the subject's buyer would consider
- Match rights conveyed, financing, conditions, location, physical traits
- Screen for arm's-length; discard kinship and heavy duress
- REO/short sales only where they define the market
- Concession adjustments come first
- Verify with transaction parties; document it
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