Comps in real estate are recently sold properties similar enough to a given home that their sale prices can be used to estimate what that home is worth. Short for “comparable sales,” they are the backbone of nearly every residential valuation in the United States. Agents use them to set listing prices, appraisers use them to produce the formal value lenders rely on, and tax assessors use them to decide what you owe each year. The logic is simple: a house is worth roughly what buyers have actually paid for similar houses nearby.
What Makes a Sale a Comp
A comp has to be a closed sale. That distinction does a lot of work. Active listings tell you only what sellers hope to get, and that hope hasn’t been tested by anyone willing to write a check. A closed sale reflects what a buyer actually paid and what a lender was willing to finance. Asking prices are opinions; closing prices are facts.
Pending sales (under contract but not yet closed) can support a valuation, but they don’t replace closed sales. Fannie Mae requires at least three closed comparable sales in any appraisal that uses the sales comparison approach. The one narrow exception is for brand-new developments where the subject property is among the first units sold; there, an appraiser may substitute up to two pending sales for one closed sale within the same project.1Fannie Mae. B4-1.3-08, Comparable Sales
What Makes a Sale “Comparable”
Location
The best comps come from the subject property’s own neighborhood or subdivision, because homes in the same area share school districts, zoning, and access to amenities. Fannie Mae’s guidance asks appraisers to use sales from the same market area “when possible” and to report the exact distance and direction between the subject and each comp. There is no hard one-mile rule. If no good matches exist nearby, appraisers can pull comps from competing areas, but they have to explain why those sales are the best available indicators and adjust for location where warranted.1Fannie Mae. B4-1.3-08, Comparable Sales Rural properties sometimes require comps from a considerable distance when the nearest similar homes are miles away.
Recency
Comps should generally come from the previous twelve months. In a market where rates or inventory are shifting quickly, even a nine-month-old sale can feel stale. A home that closed when mortgage rates were a full percentage point lower attracted a different pool of buyers with different purchasing power. Fannie Mae does acknowledge that the “best and most appropriate” comp isn’t always the most recent one, so an older sale can still be used when it is genuinely more comparable in every other respect.1Fannie Mae. B4-1.3-08, Comparable Sales
Physical Characteristics
The comp should resemble the subject property in size, layout, condition, and style. Fannie Mae’s guidance calls for similar “site, room count, finished area, style, and condition.”1Fannie Mae. B4-1.3-08, Comparable Sales In practice, that means matching square footage closely, looking for the same bedroom and bathroom counts, and taking lot size and age into account. A 1960s ranch on a quarter-acre lot and a 2020 townhouse on a postage-stamp lot serve fundamentally different buyers even if the interior square footage is similar.
How Adjustments Turn Comps Into a Value
No two houses are identical, so every comp has to be adjusted before it can tell you what the subject is worth. The adjustment runs one direction: you modify the comp’s sale price to reflect what it would have sold for if it were exactly like the subject.
If a comp has a feature the subject lacks, say a finished basement, the appraiser subtracts the estimated value of that feature from the comp’s sale price. If the subject has something the comp doesn’t, say a renovated kitchen, the appraiser adds value to the comp’s price. The goal is to strip away every meaningful difference so the adjusted prices cluster around what the subject is actually worth.
Common line-item adjustments cover differences in living area, garage spaces, bathrooms, fireplaces, and major upgrades like central air conditioning. The dollar amounts aren’t pulled from a universal chart. They come from the local market, derived by studying how buyers in that area actually value each feature. A pool adds real value in some neighborhoods and barely moves the needle in others. Appraisers are expected to base every adjustment on market data, not personal opinion.2Fannie Mae. B4-1.3-09, Adjustments to Comparable Sales
One point worth knowing: Fannie Mae does not impose fixed caps on how large these adjustments can be. An older industry rule of thumb held that net adjustments shouldn’t exceed 15% or gross adjustments 25%, but Fannie Mae’s current guidance explicitly states it has “no specific limitations or guidelines associated with net or gross adjustments.”2Fannie Mae. B4-1.3-09, Adjustments to Comparable Sales What matters is whether the adjustments are well supported.
Watch for Seller Concessions
A comp’s recorded sale price doesn’t always reflect pure market value. If the seller paid part of the buyer’s closing costs or threw in other financial incentives, the effective price was lower than what shows up in public records. A $400,000 sale with $15,000 in seller-paid closing costs isn’t the same as a clean $400,000 transaction. Fannie Mae treats concessions that exceed its limits as deductions from the sale price.3Fannie Mae. B3-4.1-02, Interested Party Contributions When you see a comp with unusually generous concessions, the number an appraiser actually works from may be meaningfully lower than the headline price.
Sales That Don’t Belong in the Comp Set
Not every closed sale is a reliable indicator of market value. A few categories get excluded or used only with heavy adjustment, and if you’re running your own numbers it’s worth knowing which transactions to leave out.
Non-arm’s-length sales are the clearest example. When buyer and seller have a preexisting relationship, such as a parent selling to a child, a divorce settlement, or a corporate relocation buyout, the price often doesn’t reflect what an unrelated buyer would have paid. Appraisers scrutinize these because the risk of an inflated or deflated price is high.
Foreclosures, short sales, and bank-owned (REO) properties present a similar issue. These sellers are under financial pressure, and the sale price typically reflects urgency rather than value. An appraiser might reference a distressed sale to illustrate market conditions, but leaning on it as a primary comp skews the valuation downward.
Sales with undisclosed concessions or unusual financing also raise flags. If the seller effectively bought down the buyer’s interest rate or funded repairs outside of escrow, the recorded price doesn’t tell the whole story.
How to Find Comps Yourself
You don’t need a real estate license to research comps, though the depth of data varies by source.
- County property records. Most counties publish deed transfers and recorded sale prices through an online portal. This is the rawest form of comp data: accurate prices, limited detail about the property’s condition at the time of sale.
- Real estate websites. Zillow, Redfin, and Realtor.com display recent sales with photos, square footage, and other details that help you judge how comparable a sale really is. Some pull directly from MLS data, which makes them more complete.
- Your real estate agent. Licensed agents have full access to the Multiple Listing Service, which contains the most detailed comp data available, including days on market, concessions, and agent remarks that reveal context you won’t find elsewhere. If you’re working with an agent, ask them to pull comps and walk through the reasoning.
Agents also compile comps into a Comparative Market Analysis, or CMA, an informal report that helps sellers set a listing price and helps buyers calibrate offers. A CMA isn’t an appraisal and doesn’t carry the same legal weight, but it’s the tool most people encounter first. Unlike a formal appraisal, a CMA can draw more freely on active listings and pending sales to show where the market seems to be heading.
Don’t Cherry-Pick
The biggest trap when running your own comp analysis is picking the sales that flatter your conclusion. It’s tempting to grab the three highest sales on your street when you’re selling, or the three lowest when you’re buying. Appraisers avoid this by selecting the most similar properties regardless of price. You should do the same, because any number you reach by cherry-picking will fall apart the moment someone with full MLS access pulls the real set.
Using Comps When an Appraisal Comes In Low
If an appraisal comes in below your agreed purchase price, you have an appraisal gap, and it’s the buyer’s problem to solve because the lender will only finance up to the appraised value. Offered $400,000 and the appraiser says $380,000? That’s a $20,000 gap your mortgage won’t cover.
You generally have three options:
- Pay the difference in cash. Bring extra money to closing on top of your down payment. This keeps the deal intact but requires reserves you may not have budgeted for.
- Renegotiate the price. Ask the seller to lower the price to match the appraised value, or at least move toward it. Sellers who need to close quickly are more likely to agree.
- Walk away. If your purchase contract includes an appraisal contingency, you can terminate the deal and recover your earnest money. Without that contingency, walking away could mean forfeiting your deposit.
The appraisal contingency is the single most important protection here. In competitive markets, buyers sometimes waive it to strengthen their offer. That’s a calculated risk: if the appraisal comes in short, you’re either covering the gap out of pocket or losing your earnest money.
Requesting a Reconsideration of Value
If you believe the appraiser used weak comps or missed better ones, you can request a Reconsideration of Value (ROV) through your lender. This isn’t a courtroom appeal; it’s a formal request asking the appraiser to review additional information. Fannie Mae’s guidance requires lenders to have a process for handling both lender-initiated and borrower-initiated ROV requests.4Fannie Mae. Reconsideration of Value
A strong ROV includes specific comparable sales the appraiser may have overlooked, along with MLS listing numbers and a clear explanation of why those comps better represent the subject property’s value. Vague complaints that the number is too low won’t move the needle. You need concrete data the appraiser didn’t consider, ideally closed sales that are more recent, closer in proximity, or more physically similar than the ones in the original report. This is where the comp research you can do yourself turns into real leverage.