A 5 Step Process For Agents When Choosing Comps

Help For Agents When Choosing Comps

As an appraiser, I often get asked by real estate agents what is the best process for choosing comps when pricing a home. This is a great question because I believe that accurate pricing upfront is 90% of a successful sales transaction.
An Agent's Guide To Choosing Comps

Often appraisers get blamed for killing deals but in reality, some sales are doomed from the start because they are priced too high. Starting off with a market-driven price will help avoid major differences between the contract price and the appraisal value.

A market-driven price is one that is developed by looking at what other similar homes have recently sold for. In addition to closed sales, it is important to also consider what other competitive properties are currently listed at because they will be the subject’s competition and you don’t want to be priced higher than them.

Check out the explainer video below that I put together several years ago. It might help you understand the process better.

Here are the steps I take when choosing comps (in no particular order)

1) Collect accurate information about the subject property

Have you heard the phrase “garbage in, garbage out”? This is true for doing comps searches as well.

You must have accurate information about the home you are pricing. The biggest area of inaccuracy I see is in the square footage of the house. If you need to find out where to get the most accurate square footage information check out my previous post.

Other information that you need that is easier to come by includes the number of bedrooms and bathrooms, the age of the home, the market area (which includes school system), and any other feature that is proven to move the needle on value.

2) Choose a suitable time frame

I always start my search by looking at the most recent sales. I initially look at sales within the past 90 days to see what has sold.

Using the most recent sales will give the best indication of what is currently happening with property values. I’m not so rigid though that I won’t loosen this search parameter a little if not many sales are found if I need to.

There is a fine line of how far to go back in time. I almost never go over 12 months unless I absolutely have to. There is no Fannie Mae rule for how old a comparable can be (this is usually a lender guideline) but if you do use older sales you must then make a time or marketing adjustment if the sales data indicates appreciating or depreciating values.

3) Determine your search boundaries

I refer to this as the competitive market area, which is the area that a buyer for the subject home would look if one were not available in the neighborhood it is in. My main criteria for this is school system since it will encompass a lot of the other location parameters we are searching for.

I start with the elementary school system because that will give me the comps that are closest to the subject. If this does not give me enough sales then I will try the middle/intermediate school and then move on to the high school.

Another way to choose your search boundaries is by using the map search feature available on most MLS systems. You are able to center the map on the subject properties address and then draw your search boundaries by using either a circle, square, or polygon to super-customize the search.

My only caution here is to make sure you narrow it down to the school system you want because if you choose the circle it could give you results for a different market area that is directly adjacent to your property but not really considered comparable.

4) Narrow down your search to the subject subdivision

I always do this to see what is happening closest to the subject. This will help us to look at price trends within the subject’s immediate neighborhood.

All of the homes will most likely be affected by outside influences in the same way. For example, if a subdivision is located next to train tracks then all of the homes will be influenced by the sound of the train.

If there is any negative influence for the proximity to the train, and all of your sales are in the same neighborhood, you will not have to make a location adjustment.

If there are not enough sales within the subject subdivision then you can search a little further out all while staying in the say competitive market area.

5) Bracket the physical characteristics of the home

I’ve talked about bracketing before as a method for choosing the best comparables. You do this by choosing a square footage range for your search.

If your home is 2,000 sf you would choose a range of something like 1,700 sf to 2,300 sf. You would do the same with the age by choosing a range that is anywhere from 5-10 years newer and older than the subject.

Remember that these are only beginning ranges. If you are in a rural area with few sales it may be necessary to expand these parameters. If a home is 60-70 years old you may need to search for homes 10-20 years newer and older.

For bedroom and bathrooms, I personally like to only search for homes with the same number of each. This will make it simpler since you will not have to be concerned with the value of that each of these features add.

If this is not possible then I would at least stay within a half bath and one bedroom of what the subject has. The more dissimilar the sale is the less comparable it will be.

If your home has finished basement area then choose these features for your comps as well. In addition, any other feature that adds value to a property should be considered such as swimming pools, barns, garage apartments, etc.

The last thing I check is to make sure the sales are arms-length transactions. Most MLS systems allow you to exclude foreclosure or short sales which I would do unless that is something you are looking for.

Ideally, by now you should have a list of comparables that have been narrowed down so that they are comparable to the subject property. If this is the case you can stop here and start analyzing the sales to come up with the value for your subject property.

If this search has not given you enough comparables to work with then you will need to expand search parameters. Following are some solutions for getting more comps.

Because we are trying to find the most similar and recent sales some of our search parameters have been narrowed down. If this does not turn up enough sales then we may need to expand these.

Tips For Tweaking Your Search

If your initial search was confined to just the subject subdivision then choose a larger area that is still within the same school system and subject to the same nearby influences.

I will start looking for other sales within a mile but if necessary will expand that until I have sufficient comparables. Keep in mind that the search should always be within a competitive market area and in neighborhoods that are similar to the subject in terms of the price range, quality, and style.

Another tip is to consider older sales. While this is not ideal there are instances when this could still give us good information to work with.

If the market has been stable with no price variations then going back in time will not matter too much. Look for older sales using the same criteria as before, starting within the subdivision and gradually expanding the search area.

My last suggestion would be to consider active, pending, and expired listings. Active listings can give us an idea of what other competitive properties are listed at and will most likely reflect the upper end of the price range.

Pending sales can provide us a snapshot of what is currently happening in the market. The best pending sales are those that have everything completed, such as an approved buyer, financing, title, and appraisal and it is just waiting to close.

Recently expired listings can also provide valuable information. They usually show us listings that were priced too high. This information can show us what the top end of the market is especially when we compare it to pending and active listings.


I hope that by me sharing the process I use to search for comparables that it will help agents with their job of choosing comps to price their listings. If you have any questions feel free to contact me and as always thanks for reading.

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  1. Hi Tom!

    Thank you for sharing your thoughts about choosing comps! This really helps me a lot understand as a home inspector in Birmingham about the work activities of my realtor and real estate agents. Keep up the good work and this content greatly help!

  2. Awesome article Tom as always, you touched on a lot of factors. I, like Jamie said, unless the attraction is cash buyers or ones with significant down payment, if a property is priced over the market or how the market has reacted in the past it is definitely doomed!!!

    • You are exactly right, Ernie. Most people don’t have the luxury of having a lot of cash buyers available to purchase their home. Because of this, they need to make sure their list price in right on the money.

  3. This was a fantastic article Tom! You covered all of the points so well! Many agents ask me about this as well. I appreciate your pointing out that the price needs to be market derived it it’s doomed from the start. Thanks for another great post!

    • Thanks, Jamie. I think that is an important point that can be lost when emotions get involved. If the price is not market-derived then it there will be a big disconnect among buyers between what the home is listed at and what the comps are selling for. This can result in an unsuccessful listing that either expires or withdrawn because it will not sell.

  4. Renee Cato says

    These are great tips, thanks!

  5. Good tips Tom. I’d add that while I wouldn’t recommend using older sales for comps in a report or listing presentation in many cases, I would definitely use them for research to understand the neighborhood market. After all, it only takes a few extra minutes to look through a few years of sales in the immediate neighborhood. When an agent sits down for a listing presentation and hasn’t looked over the past few years of sales in the immediate neighborhood, the agent may have an owner talk about Joe’s sale from down the street last year (when in fact it was 2-3 years ago), and not know what the owner is talking about. Thus sometimes seeing older sales can not only help with conversation with an owner, but it can really help us understand the context of value. Of course as you mentioned it’s important to focus on newer sales because we certainly don’t want to pass up newer lower sales for higher older ones.

    • Great tip, Ryan. I agree that agents should know the market before they sit down with their potential clients. Knowing about the newest sales can definitely give them an idea of what is going currently. The older sales can help show them what direction the local market is going.

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