What is comparable?
Strictly speaking, a comparable property is one that is a substitute for another property. It is uncommon to have properties that are directly comparable, but let me offer you a car analogy that should help you in choosing comparable properties for your market analysis, or to provide appraisers on your sales.
Most people will want to buy as much as they can for as little as possible. If you have a budget for a new car of $25,000, it is unlikely you would be out looking at BMW’s or Mercedes, whereas if you have a budget of $60,000 and want a German car, you are unlikely to be looking at VW Bugs. Is the VW Bug comparable with a BMW 5-Series? Not likely. Are they both German Cars? Of course. Would the buyer of a VW Bug choose a BMW 5-Series if they were the same price? Most likely. Would the buyer of the BMW 5-Series buy the VW Bug if they were the same price? Highly unlikely. You get the picture.
This is the same idea with comparable properties. While a buyer of a good basic tract house say 1,500 square feet, would likely jump at the chance to buy a 2,500 square foot semi-custom house if they were the same price, in equal locations, the converse would not be the case.
The reason I am putting it into these basic terms is that I have seen agents provide appraisers “comparable” properties that are anything but. To be comparable, the likely buyers of one would have to consider the other, so it is not only that the buyer for the subject will consider a far superior property, but the buyer of that far superior property would want to be reasonably considering the subject.
What does this mean when you provide sales to an appraiser? First, look for what the typical buyer for your property would truly look at as a substitution. When you do that, look at those sales in the same vein, as whether your property would be a reasonable substitution.
This bit of wisdom will help you choose the comparable properties for your market analysis, and give you a good basis of comparable properties for the appraiser should you wish to share them.
Good luck out there, and happy spring selling season!!!
As always, if you need assistance with a residential property valuation in Washtenaw County, think of me!
Rachel Massey, SRA, AI-RRS