Not All Nearby Home Sales Are Good Comps
If homes in your neighborhood are selling for more (or less), you may be wondering: “Do Nearby Home Sales Affect MY Home’s Value?”
It seems like a simple question, but the answer depends on a few important things. Recent sales nearby can affect your home’s value, but only if those homes are actually comparable to yours.
In this post, I’ll explain how this works and why some sales might matter more than others when it comes to what your home is worth.
Why People Pay Attention to Sales in the Neighborhood
When a nearby home sells, the number tends to get around. Whether it was a fast sale above list price or one that sat on the market with multiple price drops, homeowners pay attention.
That makes sense. After all, most people are curious about what homes are selling for in their neighborhood.
But here’s the thing: not every sale in your neighborhood is a good indicator of what your home is worth. Some are, and some aren’t.
The ones that are the most similar in physical characteristics to your home are called comparable sales, or “comps.”
What Makes a Sale Comparable?
To be considered a true comp, a property needs to be similar to yours in several ways. These include:
- Size — within a reasonable size range
- Age — built around the same time as your home
- Style — such as one-story vs. two-story, or traditional vs. contemporary
- Condition — has it been updated recently, or does it need work?
- Lot size — similar size and usability
- Location — not just the same ZIP code, but the same market area (such as school zones, same municipality, proximity to employment centers or other surroundings)
- Time of sale — closed recently, ideally within the past 90 days
If a house nearby is very different in one or more of these ways, it may not be a good indicator of your home’s value, no matter how close it is.
Let’s say a large, fully renovated home on a cul-de-sac sells for $100,000 more than you expected. Your home has fewer updates and is on a smaller lot. Even though the homes are near each other, they may appeal to very different buyers—and that affects how the market sees them.
Not Every Sale Reflects Market Value
It’s also important to understand that a sale price isn’t always the same thing as market value.
Here’s why:
Some homes sell for more or less than expected because of special circumstances. Maybe it was a quick sale to a family member. Maybe the seller had to move fast and took the first offer they got. Or maybe a buyer really liked the house and paid over asking.
Appraisers look at the reason behind a sale whenever possible. If it looks like a sale happened under pressure—or if the price seems out of line with similar homes, the appraiser makes note of this. In some cases, that sale may be left out of the appraisal altogether.
What Appraisers Look For
When we do an appraisal, we don’t just grab the three closest sales and call it a day. We look at how the sales fit into the overall market and consider the small details of the sale.
Here’s what goes into the process:
- We search for the most comparable homes that have sold recently.
- We make adjustments for differences, things like square footage, home features, or updates.
- We consider market trends: Are prices rising, falling, or holding steady?
- We look at what’s under contract, not just what has closed. Keep in mind that a house that went under contract yesterday is not as good as one that has the financing squared away, passed the appraisal, and is set to close.
- We check listing activity: How fast are homes selling? Are there price cuts?
We also ask: Would a buyer for this home likely consider your home as a reasonable alternative?
That question matters more than whether the property is nearby.
A Quick Note About Market Cycles
Timing plays a big role in whether a sale can be used as a reliable comp.
Real estate markets go through cycles. Prices might be rising fast in the spring, holding steady in the summer, and cooling by fall. What sold for $450,000 in April might only sell for $430,000 in October—even if it’s the same model home.
Appraisers usually try to use the most recent sales available. If older sales are used, we may need to make time adjustments to account for changes in the market.
That’s why you can’t totally rely on a sale from six or eight months ago. In a fast-moving market, it might already be outdated.
Pending Sales vs. Closed Sales
When pricing a home or estimating value, both closed sales and pending sales should be considered.
- Closed sales are completed transactions. Appraisals consist mostly of closed sales because the deal is done, and the price is confirmed.
- Pending sales are under contract but haven’t closed yet. They reflect current buyer behavior and can show where the market is headed.
Pending sales can be helpful, especially when recent closed sales are limited or dated. For example, if all the comps from two months ago sold at $400,000 but today’s pending listings are going under contract at $420,000, that could signal a shift in the market.
We don’t rely on pending’s alone, but they’re part of the puzzle when trying to understand what buyers are willing to pay right now. They should be used in conjunction with recently closed sales.
Refinancing Appraisals vs. Pre-Listing Appraisals
The type of appraisal you get also affects how comps are used—and how strict the analysis may be.
Refinancing Appraisal
When you refinance your home, the lender orders an appraisal to determine the current market value. The appraiser must follow specific guidelines set by the lender as well as by government agencies (like Fannie Mae or FHA). These appraisals sometimes have more strict guidelines around time, distance, and similarity of comps.
A bank may have secondary underwriting guidelines that limit how distant and far back in time the appraiser is allowed to go. This can limit the sales available for use by the appraiser.
Pre-Listing Appraisal
If you’re thinking of selling your home and want a realistic idea of its value, a pre-listing appraisal can help. This type of appraisal still uses comparable sales, but it also looks closely at current listings, pending contracts, and market conditions to give you a clearer picture of what buyers are currently willing to pay.
The good thing about a pre-listing appraisal is that it can help you set a smarter asking price and avoid surprises when the buyer’s appraisal comes in.
Common Questions Homeowners Ask
Here are a few of the most frequent questions I hear from homeowners when they’re trying to make sense of nearby sales and value:
Q: My neighbor’s home sold for a lot more than I expected. Can I expect the same for mine?
A: That depends on how similar your home is. If it’s nearly identical in size, condition, layout, and features, then maybe. But if theirs was updated or larger, it’s not a sure thing.
Q: A home near me sold for way less than it should have. Will that hurt my value?
A: Possibly, but appraisers investigate low sales to understand why. If it was a quick sale, family transfer, or the house needed major repairs, we’ll take that into account and may not use it.
Q: Can I use the highest recent sale in my neighborhood to price my home?
A: You can use it as a reference point, but don’t count on it unless your home matches that one in most major categories. Overpricing based on one sale can lead to longer days on market and price reductions.
Q: Will an online estimate give me a close idea of my home’s value?
A: Sometimes, but not always. Those estimates use public data, which can be inaccurate, and they can’t “see” your home. They might miss upgrades, overlook repairs, or use the wrong comps.
Q: What’s the best way to know what my home is worth today?
A: Hire a qualified appraiser who can evaluate your specific home and look at the most recent and relevant sales. That’s the most accurate way to know what buyers in your market are likely to pay.
So, Do Nearby Home Sales Affect My Home’s Value?
Here’s the short version:
- Yes, if the home is comparable in size, age, condition, and features.
- Not really, if the home is much bigger, newer, more updated, or sold under unusual circumstances.
- Maybe, if the sale happened long ago or in a changing market.
The key isn’t how close the home is—it’s how much it matches yours in the eyes of a buyer.
Conclusion
If you’ve been watching the market and wondering where your home stands, I’m here to help.
Whether you’re planning to sell, refinance, settle an estate, or just want peace of mind, I can provide a professional, independent valuation based on the facts, not guesswork.
Feel free to reach out anytime if you have any questions about the appraisal process, and as always, thanks for reading.
I find people often look at nearby sales expecting a boost in value, but the sale might not be meaningful at all for value. This is true for some really high sales (and even lower ones).
Very true, Ryan. Most people will only mention the higher sale but never the lower sale since it could hurt their home’s value. Appraisers don’t have that luxury. We must consider all sales and sort out the details to see which sales are most relevant and which ones should be included in the appraisal report.