Sales Comparables

A sales comparable or “sales comp” is the documented sale price, terms, and other pertinent information for the sale of a specific parcel of real property. For a sales comp to be effective, it should be as close as possible in geographic location, size, condition, and construction to the subject property. It should also be as recent as possible.

Sales comparables can generally be obtained from the country recorder in the county where the property is located, the county property tax database, a local title insurance company’s title plant, and/or a local Multiple Listing Service (MLS) database. Many title insurance companies will perform customer service work for real estate agents at no charge. The title information generated from computerized databases is usually fairly accurate and tends to make sales comparables easy to locate.

A real estate investor usually bases sales price on the market data appraisal method, which uses sales comparables. The income approach is generally not appropriate for use with single-family income properties. This is because a real estate investor is usually competing with owner-occupied buyers who have different financing terms and psychological motivations for purchasing a single-family home than real estate investors. When a real estate investor sells a single-family home at the end of his holding period, he most likely will sell it to an owner-occupied buyer who can and will pay more money for the property than another real estate investor.

Owner-occupied homebuyers are usually buying on emotion and generally have lower interest rates and higher loan-to-value ratios than real estate investors. For these reasons, they can and will pay more money for a single-family home than a real estate investor who is not emotional and is looking at the property strictly as an investment vehicle.

A tax record search will verify that the represented owner REALLY is the owner of the property. A preliminary title report will provide more extensive title information than a tax record search for the owner(s) of a property.