Comparable Sales Key Terms

Learn the ABCs of comparable sales before starting the appraisal process

Comparable sales are used as a means to appraising properties and obtaining the best possible market value for any given property. Values can change rapidly based on recent sales in the area and appreciation or depreciation of the property in question.

Once you've mastered a few of the key terms associated with comparable sales, you'll be able to understand how they affect the overall appraisal process. Both buyers and sellers can use comparable sales as a means of reviewing value and market stability.

Property details report or sales comps

A property details report, sometimes called sales comps, is an informational report about the properties with similar characteristics in the area. Reports allow you to compare many different options from sales price to number of bedrooms.

Comparable market analysis

The comparable market analysis, CMA, is a report that lists properties that are similar with information about the sales market. The report allows you to compare the current selling prices and historical sales numbers with the property you are interested in. A CMA will also help you determine whether prices are falling, rising or remain the same.

Alternative user value

An alternative user value is an estimate of value the property may have for a future use other than what it is currently being used as or sold as. One example would be an office space that you could convert into a salon.

Appraisal

Comparable sales are a very important part of the appraisal process. You should always hire a professional appraiser to conduct the appraisal, or review of what the property is officially worth on the market. The report can be very subjective because it is solely one person's opinion, which is why a licensed professional with experience in the area should do an appraisal.

Geographic, size and finish comparables

Comparable sales can be categorized as geographic, size or finish comparables. Each is adjusted based on the specific options present. In a geographic comparable, the appraisal is based on sales in the general area of the property. The size comparables report is based on similarly sized properties in the geographic area, and the finish comparable adjusts by comparing interior options like cabinetry, flooring, countertops and other finishings to compare properties.

Appreciation and depreciation

Appreciation is the amount of value a property gains over a time period, while depreciation is the opposite. A depreciation figure shows the loss in value over time.