What are comparable sales?
Comparable sales (commonly referred to as comps) is a real estate valuation technique that uses the sales value of a recently disposed of real property to appraise the market value of a comparable property offered for sale. This strategy can be adopted by the buyer, seller or real estate agents, and licensed appraisers who are acting on their behalf. It is not unusual during appraisals to consider tens of comparable properties before reaching the asking value of the real estate.
On the one hand, comparable sales ensure that the seller is possessed of empirical facts to justify his asking price for the real property. Similarly, the buyer will bring an informed mind to the negotiation table to bargain for a fair valuation of the real estate.
To achieve the above results, various factors are considered in the course of evaluating the comparable. These include the time of sale of similar properties, location, market forces existing at the time of selling, condition of the comparable properties at the time of purchase, amongst others.
Facts derived from comparable sales of properties are useful in negotiations for both sellers and buyers.