Strict Appraisal Rules For Comparable Sales

Realtors often provide us with comparable sales that we (when doing rebuttals) or appraisers cannot use b/c they do not comply with appraisal guidelines. Here are some basic Comparable Sale Guidelines that we re-post periodically.

a. Size: Comps need to be within 20% of the size of the subject property. For example, we usually cannot use a 1,300 sf comp for a 1,000 sf subject property. Likewise, we cannot use a 700 sf comp for a 1,000 sf property. We cannot just use a price per square foot analysis; we have to correlate to similar sized homes.

b. Distance: Comps need to be within one mile of the subject property, and not over any major barriers like a freeway or a river.

c. Same Town/City: Comps need to be in the same city as the subject property in most cases, even if the comp is less than a block from the subject property.

d. Closed: Comps need to have closed in the last 90 days. Pending sales and listings are not acceptable.

e. Lot Size: Lot sizes must be accounted for too. If the subject property is on a small lot of 6,000 sf for example, a comp on a 12,000 lot will have to be downward adjusted significantly in most cases. This is also why a “price per square foot” analysis does not work. A small house on a large lot skews the analysis.

f. Adverse Influences: If the subject is on a busy street or abuts a school, a freeway or an industrial area, valid comps will need to have similar adverse influences.

g. Bracketing Comps: Valid comps need to “bracket” the appraised value. Hence, at least one comp needs to be priced higher than the appraised value, and one should be priced lower.

h. Condo Comps: Comps need to be from both inside and outside of the complex.

Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 01524255, NMLS# 335646