Understanding Comparable Sales: How Homes Are Actually Priced
The short answer
- Comps are recently sold, similar homes — they are the main evidence of market value
- Good comps are recent, similar in size and condition, and in the same neighborhood
Go deeper · tap a topic
Why this matters
A home is worth roughly what similar homes have recently sold for — not what the seller wants, and not what an online estimate says. Understanding comparable sales ("comps") is one of the most useful skills for judging whether a price makes sense.
What Makes a Good Comp
A strong comp is a recently sold home close to the one you are considering in size, bedroom and bathroom count, lot, and condition, in the same neighborhood or a very similar one. Recent sales carry the most weight; appraisers for Fannie Mae loans generally use sales that closed within the last 12 months. Foreclosures and short sales can be used, but they need adjustment. The closer the match, the more reliable the comp.
How Agents Use Comps
Your agent will pull a Comparative Market Analysis (CMA) — a report showing recent sales of similar homes in the area. This helps you determine a fair offer price. Listing agents use the same data to set asking prices. When comps support a lower value than the asking price, you have data to back up a lower offer.
How Appraisers Use Comps
The appraiser your lender orders also uses comps, usually at least three closed sales, to estimate value. They make adjustments, adding value for a garage the home has that a comp lacked, or subtracting for a smaller lot. If the appraisal comes in below your offer price, you have an appraisal gap: you may renegotiate, cover the difference in cash, or rely on your appraisal contingency. If the appraiser missed a better comp, you can ask your lender to submit a reconsideration of value, and lenders must accept borrower-initiated requests on Fannie Mae and Freddie Mac loans. Knowing the comps before you offer lowers the chance of a gap.
Everything to remember
- Comps are recently sold, similar homes — they are the main evidence of market value
- Good comps are recent, similar in size and condition, and in the same neighborhood
- Your agent's CMA and the appraiser's report both rely on comps
- Understanding comps before you offer helps you bid with confidence and lowers the risk of an appraisal gap
Was this about you?
Finding a home: 1 of 11 read