What Makes a Good Comp
A reliable comparable shares the core characteristics of the subject property: the same general property type and class, a location in the same or a competing submarket, a recent transaction date, similar size, and a similar physical condition or vintage. Just as important, the transaction itself should be arm's-length — a sale between unrelated, willing parties under no unusual pressure — since distressed sales, foreclosures, or related-party transfers rarely reflect true market value.
Most analyses aim for at least three to five solid comps rather than relying on a single data point, since any one transaction can be skewed by circumstances specific to that deal.
Sourcing Comparable Sales and Rents
Comps typically come from commercial data platforms, public recorded-deed records, broker networks, and prior appraisal reports. Wherever possible, analysts verify the key details of a comp — actual sale price, financing terms, in-place occupancy, or lease terms — directly with a party to the transaction, since public records and secondhand data can be incomplete or misleading.
The Adjustment Process
Once a comp set is assembled, each comp is adjusted for the ways it differs from the subject, typically across four standard categories: time (market movement between the comp's sale date and the valuation date), location (submarket or micro-location quality), condition (age, renovation level, finishes), and size (larger properties often trade at a lower price per square foot due to economies of scale).
The adjustment always moves the comp toward the subject: if a comp is superior to the subject in a given attribute, its value is adjusted downward to reflect what it would have sold for if it only matched the subject; if a comp is inferior, it is adjusted upward.
Reconciling to a Value Conclusion
After adjusting every comp, the analyst reviews the resulting range of adjusted prices or rents per square foot (or per unit) and weights the most reliable, most comparable transactions more heavily than outliers requiring large or numerous adjustments. The output is a single point estimate or a narrow supportable range, which is typically cross-checked against an income-approach value derived from net operating income and a market cap rate before a final conclusion is reached.
Standard Adjustment Categories
- Time / market conditions since the comp's sale or lease date
- Location or submarket quality
- Physical condition, quality of construction, and age
- Size (economies of scale in price per square foot or per unit)
- Property rights and lease terms (for rent comparables)
- Access, visibility, and parking
Red Flags in a Comp Set
- The sale involved related parties, a foreclosure, or other distress
- The comp is more than 12-24 months old in a fast-moving market
- The comp is a different property type or building class than the subject
- No verified rent roll or operating data supports the reported sale price
- The comp's size or location differs so much that adjustments exceed a reasonable share of value
Adjusted Comparable Value (Percentage Adjustment Method)
Adjusted Price/SF = Unadjusted Price/SF × (1 + Sum of Adjustment %)
- Unadjusted Price/SF
- — The comp's actual transacted price per square foot (or per unit) ($/SF or $/unit)
- Sum of Adjustment %
- — The net of all percentage adjustments applied for time, location, condition, and size differences between the comp and the subject (%)
Each comp's price is increased or decreased by the net percentage adjustment needed to make it equivalent to the subject property, producing an adjusted price that is directly comparable across every comp in the set.
Worked example: A comp sold at $185/SF. Applying a +2% time adjustment, -3% location adjustment, +4% condition adjustment, and -1% size adjustment nets to +2%. Adjusted Price = $185 × 1.02 ≈ $189/SF.
Sample Comparable Sales Adjustment Grid (Illustrative)
| Comp | Unadjusted Price/SF | Time | Location | Condition | Size | Net Adjustment | Adjusted Price/SF |
|---|---|---|---|---|---|---|---|
| Comp 1 | $185 | +2% | -3% | +4% | -1% | +2% | $189 |
| Comp 2 | $210 | +1% | -8% | 0% | -3% | -10% | $189 |
| Comp 3 | $175 | +4% | +5% | -2% | 0% | +7% | $187 |
Adjust the Comp, Not the Subject
The convention runs one direction only: you always adjust the comparable's price toward what it would have sold for if it were identical to the subject. If a comp is superior to the subject in a given attribute, its price is adjusted downward; if inferior, it is adjusted upward. It is easy to reverse this instinctively mid-grid, so double-check that every adjustment in a set points the same conceptual direction before reconciling to a value conclusion.
Module Check
In the sales comparison approach, if a comparable property is superior to the subject property in a given attribute, how should that comp's price typically be adjusted?