When buyers and sellers talk price, appraisers talk comps. That’s shorthand for the Sales Comparison Approach—the primary method used to value most residential properties because it mirrors how the market behaves: buyers compare and pay based on similar, recently sold homes.

The Three Approaches (and why this one leads for homes)

• Sales Comparison Approach (SCA): Compare recent, similar closed sales and adjust for differences.
• Cost Approach: What it would cost to build new, minus depreciation (useful for new/unique homes; support only in many residential cases).
• Income Approach: Value from rent/return (more common for rentals and multi-family).

For typical owner-occupied homes, SCA is the gold standard because it’s anchored in real buyers and real prices.

How the Sales Comparison Approach Works

1) Define the subject & scope
Document the property’s features: GLA, beds/baths, condition/quality, lot, view, upgrades, permits.

2) Select the best comps
Closed sales first—recent, nearby, and truly similar in size, age, condition, and location/context. Pendings and actives can support direction, not replace closed sales.

3) Verify and measure
Confirm square footage (GLA vs. below-grade), permit history, and any material differences that impact utility or appeal.

4) Make market-supported adjustments
Adjust the comps—not the subject—for meaningful differences such as:

• GLA & room count (paired sales-derived $/sf, bedroom/bath effects)
• Condition & quality (renovations, materials, systems age)
• Amenities (garage, pool, outdoor living, energy upgrades)
• Lot & view (size, usability, privacy, orientation)
• Location/context (school zone, traffic/noise exposure, adjacency)
• Time/market conditions (appreciation/depreciation since comp’s contract/close date)
• Concessions (seller credits that affected net)

5) Reconcile
Weigh the strongest evidence and explain why—no cherry-picking the highest price. The conclusion should sit comfortably within the range indicated by the best-supported comps.

Common Misconceptions (let’s kill these)

• “Highest comp sets the price.” No—relevant comp set + supported adjustments set the value.
• “Price per square foot tells the whole story.” It’s a ratio, not a valuation.
• “More comps = better.” Quality > quantity. A tight, well-supported set beats a grab bag.
• “Pendings are enough.” Useful for momentum, but closed sales carry the weight.

How You Can Help the Appraisal Be Right the First Time

Agents/Sellers

• Provide a data packet: updates with dates/costs, permits, floor plan, measurements, HOA details, offer counts, concessions.
• Suggest truly comparable recent closed sales; flag strong pendings for market direction.

Buyers

• Read the adjustment logic—value is about comparability and market reaction, not headline prices.
• Understand time adjustments in moving markets.

Appraisers

• Cite paired sales and show how adjustments were derived.
• Be explicit in reconciliation—why some comps carry more weight.

Key Takeaways

• For most homes, Sales Comparison is the gold standard.
• The job isn’t to pick a number; it’s to support one with relevant comps and documented adjustments.
• Clean property data and transparent market context make for smoother, more credible valuations.

Questions about a file or an approach?
Visit nationwideamc.com and use Contact Us to reach our valuation team.

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