HOME BUYING
From Listings to Living
Your offer of $430,000 on a three-bedroom house was accepted, and the listing agent called the price "well supported by comps." Two weeks later the appraisal comes back at $415,000, built on three sales you never saw. Before you argue with the number, it helps to know exactly what the appraiser did with those three houses.
So what do comps mean in real estate? Comps, short for comparable sales, are recently sold homes similar enough to the one being valued that their prices show what buyers in that market are willing to pay. An appraiser picks at least three, adjusts each sale price for the ways it differs from your home, and reconciles the adjusted prices into one opinion of value. Agents use the same idea, more loosely, to suggest a list price or an offer.
So the useful question is less "what are the comps" than "why these comps, and how were they adjusted." Both answers are on the appraisal report, and lenders that sell loans to Fannie Mae follow written rules for each.
Leevli Editorial Team
Every appraisal for a loan sold to Fannie Mae reports a sales comparison approach. It rests on a simple idea: a buyer will not pay much more for your home than for an equally good one down the street. Real estate comps are the evidence for that comparison, and for a buyer, what comps mean in practice is a soft ceiling on the price a lender will finance.
Three kinds of sales show up in conversations about comps, and they are not equal:
Fannie Mae's Selling Guide section on comparable sales requires a minimum of three closed comparables in the sales comparison approach. Contract offerings and current listings may be added as supporting data, but they do not count toward the three. If the subject home itself sold before, that prior sale can serve as a fourth comparable or as support.
The Selling Guide leaves the choice to the appraiser, who must use the sales that are the best and most appropriate for the assignment. In practice that comes down to three filters.
Similarity. Comparables should share the subject's physical and legal characteristics: site, room count, finished area, style and condition. They do not have to be identical. The guide asks for sales that are competitive with the subject and appeal to the same buyers.
Location. The guide prefers sales from the same market area, including the same subdivision or project, when possible. It defines the market area as the region where most of the demand and most of the competition for the property come from, and it allows sales from competing market areas. There is no fixed radius. The appraiser reports each comp's distance in miles, measured in a straight line, with a direction such as 0.4 miles NW, and a rural home can use sales a considerable distance away if the results are credible.
Recency. This one has its own rule, covered next.
Fannie Mae's guide on property condition and quality requires a standardized condition rating, C1 to C6, for the subject and for every comp. C1 is a new, never-occupied home and C6 a home with severe defects. A comp rated C3 next to a subject rated C4 tells you an adjustment is coming. What appraisers look for when they assign those ratings to your own home is the subject of our home appraisal checklist.
Sales that closed within the last 12 months should be used, according to Fannie Mae. That is a starting rule, not a hard ceiling. The guide says the best sales may not always be the most recent, and it gives the example of a nine-month-old sale with a time adjustment being more appropriate than a one-month-old sale that requires multiple adjustments. Older sales are also acceptable where recent ones are scarce, such as in rural areas, as long as the appraiser explains why. What older comps mean for the report is more explanation, not automatic rejection.
Age matters because markets move. The appraiser must analyze market changes between each comp's contract date and the appraisal's effective date, and Fannie Mae's guide on adjustments to comparable sales says time adjustments, or the lack of them, must be supported by evidence. Home price indexes are acceptable support. A comp that went under contract last month may need no time adjustment at all.
The adjustment grid is where comps turn into a number, and reading one is the fastest way to see what comps mean for a final value. Each comp's sale price is adjusted toward the subject: if the comp has something better than the subject, its price is adjusted down; if it has something worse, its price is adjusted up. The table below is an illustrative example with made-up figures, not data from any real sale.
Say the subject is a 1,800-square-foot, three-bedroom house in well-maintained condition (C3) with a two-car garage and no pool, in a neighborhood like Five Points in Raleigh. Assume, for illustration, that local sales support $100 per square foot for size differences, $15,000 for a C3 versus C4 difference, $8,000 for a second garage bay, $10,000 for a pool, and a 1 percent upward time adjustment for sales more than six months old, with none for newer sales.
| Line | Comp 1 | Comp 2 | Comp 3 |
|---|---|---|---|
| Sale price | $412,000 | $385,000 | $405,000 |
| Months since sale | 4 | 7 | 2 |
| Market conditions (time) | $0 | +$3,850 | $0 |
| Seller credits at closing | $6,000: -$6,000 | None: $0 | None: $0 |
| Living area | 1,900 sq ft: -$10,000 | 1,750 sq ft: +$5,000 | 1,800 sq ft: $0 |
| Condition | C3: $0 | C4: +$15,000 | C3: $0 |
| Garage | 2-car: $0 | 2-car: $0 | 1-car: +$8,000 |
| Pool | None: $0 | None: $0 | Pool: -$10,000 |
| Net adjustment | -$16,000 (-3.9%) | +$23,850 (+6.2%) | -$2,000 (-0.5%) |
| Gross adjustment | $16,000 (3.9%) | $23,850 (6.2%) | $18,000 (4.4%) |
| Adjusted price | $396,000 | $408,850 | $403,000 |
The adjusted prices run from $396,000 to $408,850. An appraiser who gave the most weight to Comp 3, the most recent sale with the smallest net adjustment, might reconcile at about $402,000. Fannie Mae requires the final value to fall within the range of the adjusted sale prices and the comments to explain why the most-weighted sales were chosen.
A few rules decide what comps mean on a real grid:
What comps mean depends on who is reading them. The same sales can feed three very different products, which is why two people can quote "the comps" and arrive at different numbers.
| Product | Who prepares it | Which sales it uses | What it is used for |
|---|---|---|---|
| Comparative market analysis (CMA) | A real estate agent | Closed sales, often plus pendings and actives the agent selects | Setting a list price or an offer |
| Appraisal | A licensed or certified appraiser engaged through the lender | At least three closed sales, adjusted on a grid, with listings as support | The lender's collateral decision |
| Automated valuation model (AVM) | An algorithm, such as Zillow's Zestimate | Recorded sales and listing data across a wide area | A quick starting estimate |
The comps vs appraisal difference is mostly about rules and accountability. An agent's CMA can include a hopeful active listing; an appraisal cannot count one toward its minimum. AVMs cast a wider net: Zillow says on its Zestimate page that it uses data from an area up to the size of a county and that the Zestimate is not an appraisal. How the three compare in accuracy and cost, and when each is enough, is covered in our guide to how to value your house.
For a condo, the most comparable sale is usually another unit in the same building, because units share the same dues, reserves, amenities, insurance and financing eligibility. The Selling Guide's general preference for sales in the same subdivision or project points the same way. For a new or recently converted condo project, the guide goes further: the appraisal needs at least one settled sale from inside the project and at least one from outside it, with a third from either.
Inside one building, what comps mean can shift quickly. Two units with the same floor plan can still be poor comps for each other. A sale that closed before the board announced a special assessment, or before a lender flagged the building, may tell you little about today's price. Our guides to HOA special assessments and whether a condo is a good investment explain why building finances show up in resale prices. If you are still deciding between unit types, our comparison of condo vs house covers the cost side, and what a condo is explains the ownership interest you are actually pricing.
Say you are pricing a one-bedroom in a mid-rise in Charlotte's South End (an illustrative example). The strongest comps are recent sales of similar units in your building, adjusted for floor, view and parking. Next come units in competing buildings of similar age and amenities, with an eye on how their monthly dues differ.
Buyers and owners can pull rough comps before an agent or appraiser does, and knowing what comps mean to an appraiser shapes how you pull your own. The goal is a short list you can defend, not a long list that agrees with you.
Say you are comparing houses on one block in The Heights in Houston and one was renovated last year while another has its original kitchen: photos and listing remarks will tell you more than the square footage line. If you are pricing a condo in Lincoln Park in Chicago, filter by building first. Your county assessor relies on comparable sales too, which is why our guide to condo property taxes recommends sales of nearly identical units as evidence in an assessment appeal.
A low appraisal usually means the appraiser's comps, or the adjustments to them, differ from the ones behind your contract price. Work out what those comps mean before you react: a missed sale is fixable, a fair adjustment usually is not. You have more room to respond than many buyers think, as long as you stay on the right side of appraiser independence rules.
The CFPB's Regulation Z valuation independence rule bars lenders, agents and other covered parties from trying to push an appraiser toward a minimum or maximum value. The same rule expressly permits asking the appraiser to consider additional, appropriate property information, including information about comparable properties, to explain the conclusion, or to correct errors. Fannie Mae's Appraiser Independence Requirements restrict loan officers and real estate agents from substantive valuation conversations with the appraiser, but let any party request additional information, an explanation or the correction of factual errors.
In practice, send better comps through your lender, with a short note on why each one is more similar than a sale the appraiser used. The timeline for that request, and what happens to your closing date, is covered in our guide to how long after the appraisal you close. If the appraisal has not happened yet, our guide to how long a home appraisal takes sets expectations. Some conventional loans skip the appraisal entirely; our explainer on the appraisal waiver covers when that happens and why you might want comps reviewed anyway.
Comps tell you what the market paid. A licensed appraiser or your agent is the right next step when the number decides whether you can close, and the people living in the building can tell you what the comps cannot. You can ask them on Ask a Resident, or compare units on Leevli listings.
A comp is only as good as what you know about it, and residents often know what the sale record leaves out.
Listings show the property, but they rarely explain the lived reality around it. On Leevli, a mover can explore the city, review neighborhood and building information, and ask a verified resident the specific questions that remain unanswered. That human layer helps readers know what to investigate before signing a lease, making an offer, or choosing between two addresses.
Comps are comparable sales: homes similar to the one being valued that sold recently in the same market area. Their prices, adjusted for differences in size, condition, features, location, sale date and seller credits, show what a typical buyer would likely pay for the subject home. Appraisers, agents and assessors all use them, under different rules and with different levels of rigor.
For loans sold to Fannie Mae, the sales comparison approach needs at least three closed comparable sales. Appraisers can add more closed sales, use the subject's own prior sale as a fourth comparable, or include pending sales and current listings as support, but pendings and listings do not count toward the three. Conventional loans that receive Fannie Mae's value acceptance offer close with no appraisal, so no comps are reported at all.
Fannie Mae's guide says comps that closed within the last 12 months should be used. An older sale can be the better choice if it needs fewer adjustments, and older sales are acceptable where recent ones are scarce, as in some rural areas. The appraiser must explain the choice and support any time adjustment, or the absence of one, with market evidence such as a price index.
Fannie Mae sets no fixed distance. Appraisers report each comp's straight-line distance in miles with a direction, and the guide prefers sales from the same market area, including the same subdivision or project, when possible. Rural appraisals can use sales a considerable distance away if the results are credible. A comp across a major boundary that buyers treat as a different market is a weak spot worth checking.
Comps are the evidence; the appraisal is the licensed opinion of value built from them. An appraiser selects at least three closed sales, adjusts each on a grid, and reconciles them into one value the lender relies on. Anyone can pull comps, but a list of sales without adjustments and reasoning is not an appraisal and will not satisfy a lender.
The grid lists each comp's sale price, then adjusts for differences from the subject: sale date and market conditions, seller concessions, location, site, living area, room count, condition, quality, garage, basement and features such as a pool. Better features in the comp mean a downward adjustment; weaker ones mean an upward adjustment. Adjustments must reflect what the market pays, not what the feature cost.
Yes. A $400,000 sale with $10,000 in seller-paid closing costs may reflect a lower true price. Fannie Mae requires a negative adjustment equal to the price increase the appraiser attributes to the concession and does not allow positive concession adjustments. A common mistake when pulling your own comps is treating a credit-heavy sale as a clean price.
The same rules apply, but sales in the same building usually make the best comps because units share dues, reserves and financing eligibility. For a new or recently converted condo project, Fannie Mae requires at least one settled sale from inside the project and one from outside. A building's special assessment or financing problems can make an older in-building sale less useful.
Federal Regulation Z lets lenders and others ask an appraiser to consider additional, appropriate information, including comparable sales, and to correct errors. Pressuring the appraiser to reach a value is prohibited. The cleanest route is a written request through your lender with each comp and a short reason it fits better. The review can push back your closing schedule, so ask early.
Yes. Listing sites let you filter for sold homes, and some counties publish recorded sale prices or assessor data online. Agents commonly pull MLS comps for clients as part of a buyer or listing relationship. What free tools often miss are concessions, condition and contract dates, which is why an appraiser's comps can differ from yours.
This article is informational and does not constitute legal, financial, tax or insurance advice.
