4 Things an agent should do before they offer comps to the appraiser

Do you ever offer comps to the appraiser?

Are you a real estate agent, and do you ever offer comps to the appraiser? If so then keep reading, because knowingoffer comps or sales to the appraiser how to present this information to the appraiser can increase the chances they’ll take you more seriously.

Knowing  what parameters to look for in a comp and being able to describe this to the appraiser can give you more credibility and let them know that you did your homework when putting together your CMA.

You see, many times appraisers are faced with trying to decide whether the comps an agent gives them were chosen just because they were the highest priced sales in the neighborhood or because they are the most similar homes for comparison to the property being appraised.

The value of an appraiser is based on the fact that they are an unbiased third party hired to provide an educated and market based opinion of value for the house you are selling. Every other party to the transaction has a vested interest in the home appraising for the contract price. The appraiser is being hired by the lender to determine if their collateral for the loan is worth what is being paid so that their possible future losses are minimized.

Today I’m going to share with you 4 things an agent should do before they offer comps to the appraiser so that the likelihood of the appraiser actually using these sales is increased and the chances of a low appraisal are reduced.

Trust but verify

Whenever an appraiser receives sales comparables from an agent they cannot just automatically use them in the appraisal but they must be properly vetted. One thing I like to point out to agents is that just because a nearby home recently sold does not mean it can or should be used in the appraisal. The appraiser must look at it and determine its comparability to the subject property. After it is determined that it compares well all of the pertinent information must be verified by a party involved in the sale.

This is the same for the sales that you provide to the appraiser. They cannot be considered “comps” until the appraiser has looked at them and determined if they are truly comparable. The word comp is thrown around a lot with most people incorrectly assuming that a all sales are comps, which is not true. They have to pass the “comp test” before they can officially be called a comp.

By following the tips shown below the chances of the sales you’ ve passed along to the appraiser being considered good comps will be increased.

What to do before you offer comps to the appraiser

DO NOT search for comps using price as a criteria- You should NEVER search for comps based on price because by doing so you are setting out with a predetermined value in mind and will most likely find sales to support your biased opinion of value.

Instead of using price as a criteria you should bracket the physical characteristics of the property, taking into consideration locational attributes such as school system, neighborhood, and city/municipality. The best place to start would be recent sales within the same neighborhood. By choosing sales that are a little bigger, a little smaller, and approximately the same size you’ll get a better context for where  your property should be.

In addition to the square footage you should look at homes that have other similar features. I get asked a lot about how much value a basement contributes to a  house but if you’re choosing the best comps this really shouldn’t matter because the sales will have a similar finished basement as the subject property does.

One situation related to this that can contribute to an inaccurate list price is using a home with finished basement area as a comp for a home that has none. This would not be comparing apples to apples because they are not similar homes. This is especially true if you are looking at the price per square foot of the home with finished basement. It will typically sell for more per square foot than the one without finished basement.

Get the accurate square footage of a home so that your search criteria are more relevant- Knowing the accurate square footage of the home you are pricing is very important. When everything else is similar between two homes, the one with the most square footage will typically sell for more.

If you are using an incorrect square footage then you will not be able to do an accurate CMA when pricing the home. This will really come back to bite you during the mortgage appraisal because if you priced  your home with the assumption that it was a certain size and the the appraiser measure it to be 500 square feet smaller, the appraisal will most likely come in low, so it is important to know where to get accurate square footage when pricing your homes.

Ask yourself “would I show these sales to my buyer?”- By asking yourself this question each time you consider using a sale as a comp you’ll end up with better quality comps.

I’ve seen agents who are trying to provide support for a higher list price on a home go to a superior neighborhood and use sales out of there to get the value higher. If they would have asked themselves the question I mentioned it would probably have eliminated even looking in that neighborhood.

Things to look for in a neighborhood when asking this question include school systems, style and quality of homes, and the city/municipality they are in (some cities have higher taxes), and the price range of homes.

Make sure they are the most recent sales- It’s easy and tempting to cherry pick the sales you want to use when pricing a home. If you look back over the last 6-12 months and find ten sales that occurred, you may be tempted to use the 3 highest sales and go with that, but that is not always the best thing to do.

If some of the more recent sales are lower than the ones you chose this could be telling you something. Maybe the local economy has started to decline and this has had an effect on home prices. Or maybe the supply of homes has increased and there is more competition, which has driven home prices down. These are all things that should be considered.

Along the same lines would be current and active listings in the area. If the current listings are priced lower than sales from 6 months ago this could also be indicating lower housing prices. Because the real estate market is always changing it is important to use the most current information as it will more accurately reflect what is going on in the market now and will most likely give you the best indication of value.


Do you have another tip you would like to share, or maybe an experience you had? If so leave a comment below and let’s keep the conversation going. As always, thanks for reading.

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  1. Lisa Bond says

    Basements are an improvement to the property and are given a value as any other improvement. They should not be used when comparing the GLA of a home, as clearly outlined by USPAP guidelines, but can and should be used a comps to a subject property, as adjustments can be made for the improvement. The value of a basement is only 15 to 20% of the cost. It isn’t possible to exclude them especially if the homes are within a development. Second, USPAP guidelines call for comps to be within one mile of the home, and must have been sold within the last 12 months, with 2 comparables having been sold within the last 3 months. It isn’t possible to exclude them nor should they be. Adjustments are made for sq. ftg., lot size, topography, value, additional bedrooms, baths, and basements, etc. using the Marshall Swift cost index. No two homes are going to be exactly the same. In a large development, comparables have to used within and adjusted for any differences. Best practice guidelines also indicate that at least 6 comparables should be used to give the fairest value. Any appraiser who does not follow the USPAP rules and guidelines would pose a huge concern. To say that homes that homes with the most sq. ftg sell for higher is also an inaccurate statement. Land value and the price of the lot are also taken into consideration, along with the amenities of the home. One home may be brick, the other home may be siding. Your statements appear to contradict the USPAP guidelines since they appear to be based largely on opinion and not appropriate guidelines.

  2. Mark Van Zeelt says

    Thank you for your well written article.

    One additional consideration might be why a sale should not be used as a comparable. Occasionally, there may be a nearby sale that appears very similar to the subject, based on the published criteria. But if there are motivations of the seller that are not readily apparent, these can cause the sale to be a non-arms length transaction. There may have been a recent job loss, sudden transfer out of State, or an estate sale. If the appraiser is unaware of these situations, it could cause the appraiser to incorrectly use it as a comp. Of course, the appraiser should not take the agent’s word for it without verification. This information can and should be verified before discounting them, but it can be a valuable way for an agent to assist the appraiser. Also, the existence of any of these do not automatically disqualify it as a comparable. It would be up to the appraiser to determine the relevance of the information.

    • Mark, you make some very good points. This is why it is very important for the appraiser to verify terms of the sale either with the buyer, seller, or agent. When we know everything about the sale then we can determine if it would be appropriate to use it in an appraisal. Thanks for your input.

  3. Oh man. This is why I love paper. I whip out the workfile right there in front of the agent. I peruse my filtered data set with varied 1 line overview, thumbs, and full broker print cards to see if it’s there. Using the 1 line top page print to quickly peruse data and identify where these ‘comps’ really are. If I have to roll all the way down to my 1 mile 1 year unfiltered data set to find that ‘comp’, it’s game over on that ruse. LOL. Paper, beats the nonsense to the curb every time. Lots and lots of paper. Love my paper workfiles, absolutely love them. It’s been a very very long time since an agent caught me off guard with comps and such. They typically hush up quickly when I whip out the work file, demonstrate market research competence beyond theirs, and show that I’m all in with astute research methods. LOL. Try that sort of quick fire debate while using a mobile device. Double dare you to try it. Paper is effective for exactly those types of scenarios. And I can pick comps right then and there and come to a consensus with the agent if I need to. Works like a charm on time, every time. If you have to tell a sales agent to not search by price, that person should not be in place as a sales agent in the first place. We appraisers watch these hopeful market agents come and go all the time, and the industry turnover is tremendous. Always has been, always will be. And now with the most annoying and problematic automatic 3 up and variety cma tools companies like corelogic are offering, everyone and their mom thinks they know what comps are good, and what are not. As an appraiser, I roll with no less than 50 something well researched possible comps, if not much more than that in every workfile. The key to astute appraising is to wait to pick comps until after you’ve reviewed the property. The key to good realty agency is to get a trusted appraiser in there ahead of time, and have the sellers pay for the pre listing service. CMA’s, BPO’s, 3UP’s, etc, are all just tools. The rules for tools is they’re only as effective as the operator behind them.

  4. Great tips as usual Tom. I’m glad that you explained how appraisers feel when they receive comparable sales from an agent and trying to figure out if these sales were just provided because they are trying to push the opinion of value up or if the agent is really trying to be helpful. Comparable sales should be balanced with a couple overall inferior and a couple overall superior. I usually tell agents not to just print all of the sales in the area, but to give appraisers the one or two sales that are ringers and, more importantly, to explain anything they know about them. For example, an agent might say here is a model match from right down the road and it looks very similar in the pictures, but I can tell you from having seen the inside that it was rented and the owners had dogs that scratched everything up. Also, the owners had it on the market for nine weeks, but then they had to sell and cut the price significantly so they did not lose the house they made and offer on. That kind of information is gold, can easily be verified and will go much further to make sure the appraiser does a fantastic job on the appraisal.

    • You’re right Gary. Providing a commentary on the details of a sale and the properties condition can go a long way in helping the appraiser.

      • Well said above, Gary. Sometimes agents have a unique perspective on some of the comps if they’ve been in the home. Or maybe a colleague sold the property. Or maybe a buyer the agent was representing put in an offer. There can be some first-hand knowledge that can be useful for appraisers to sift. On the other hand it’s not useful to appraisers to get a stack of “comps” that really are in no way competitive. At the end of the day, let’s remember “comps” are supposed to be a substitute for the subject property. If the subject property was not available, would buyers realistically consider purchasing the comps?

        Keep up the great work, Tom.

        • Thanks Ryan. I think you hit the nail on the head with your”substitute” comment. Bottom line is, if the buyer wouldn’t consider the sale then the agent shouldn’t consider it as a comp.

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