How to Calculate Real Estate Comps and Adjust Values

To calculate real estate comps, pull at least three recently sold homes that closely resemble the property you’re valuing, adjust each sale price up or down to account for differences with your subject home, and then reconcile those adjusted prices into a single value estimate by giving the most weight to the comp that needed the fewest changes. Fannie Mae requires a minimum of three closed comparable sales for any appraisal using the sales comparison approach, and the same framework guides agents pricing a listing or homeowners checking their equity.¹

Step 1: Pick Sales That Actually Qualify as Comps

Not every recent sale is usable. A comp has to share the core traits of your subject property, or the adjustments needed to bridge the gap will swamp whatever signal the sale price provides.

Proximity

Stick to the same neighborhood or a competing area where buyers would realistically shop for both homes. Fannie Mae asks appraisers to document the exact distance and direction from the subject property but sets no hard mileage cap. In dense suburban markets, most usable comps sit within a mile or two. In rural areas, the search may reach much farther, provided the comparable reflects the same market influences as the subject.

Recency

Fannie Mae guidelines call for sales that closed within the last 12 months. The most recent sale isn’t automatically the best one: a closing from eight months ago that closely matches your home tells you more than a sale from last week that requires heavy adjustments. In fast-moving markets, appraisers lean on the freshest data available, but the 12-month window gives room to work when inventory is thin.¹

Physical Similarity

Match the subject home’s general profile: similar square footage, bedroom and bathroom count, lot size, age, and property type. Comparing a single-family home to a condo or townhouse introduces too many variables, since different property types attract different buyer pools. Fannie Mae’s list of traits an appraiser must evaluate includes site characteristics, room count, finished area, style, and condition.¹

Three Is the Floor

Any appraisal using the sales comparison approach must include at least three closed sales. Fewer than that lets a single unusual transaction distort the estimate. Three data points create enough of a pattern to tell whether buyer behavior in the area is consistent or scattered.

Step 2: Where to Pull the Sales Data

Your analysis is only as good as the data feeding it, and the sources differ sharply in what they show.

The Multiple Listing Service is the most detailed database for residential transactions. It’s a private system maintained by real estate professionals, and access generally requires a real estate license or an arrangement with a licensed agent.² MLS records include closing prices along with agent remarks, days on market, and concessions the seller made. That context matters when you need to understand why a home sold for what it did.

County recorder and assessor offices provide the legal record of title transfers and deed prices. These records are free and open to anyone, but they lack the context MLS provides. You’ll see the sale price, but not the $15,000 the seller paid toward the buyer’s closing costs that inflated it. Public records work best as a verification layer alongside MLS data. One wrinkle: roughly a dozen states don’t require sale prices to be publicly recorded, so if you’re working in a non-disclosure state, MLS access or a relationship with a local agent becomes essential.

Consumer-facing real estate portals aggregate data from various sources and let anyone filter by neighborhood, date, and features. They’re a reasonable starting point for a homeowner’s informal analysis. Filter for sold listings only. Active listings reflect what a seller hopes to get, and pending sales haven’t finalized. Even with sold data, cross-check the closing price against public records when possible, because seller concessions and price reductions after listing may not appear on every portal.

Step 3: Adjust Each Comp’s Price for Physical Differences

No two homes are identical, so every comp needs adjustments to account for differences with the subject. The logic runs in a direction that trips people up at first: you’re adjusting the comp’s price, not the subject’s value. The question you’re answering is, “What would this comp have sold for if it had been identical to the subject home?”

Which Way the Adjustment Goes

When a comp has something the subject lacks, subtract from the comp’s sale price. If a comp sold for $400,000 and has a two-car garage the subject doesn’t, subtract the market value of that garage. When a comp is missing something the subject has, add to the comp’s price. The adjustment always moves the comp’s price toward what it would have been if it matched the subject.³

Common Line Items

Appraisers assign dollar values to individual differences, and Fannie Mae is explicit that those values must come from actual market analysis rather than rules of thumb. An appraiser can’t apply a $20-per-square-foot adjustment on every report because that’s what they’ve always used; they need evidence from local paired sales showing what buyers actually pay for the difference.³ Typical line items include:

Square footage, with per-foot values that range from well under $100 in affordable areas to several hundred dollars in high-cost neighborhoods.
Bedroom and bathroom count. An extra full bath might warrant a $5,000 to $10,000 adjustment in a mid-range market, with extra bedrooms in a similar range depending on the area.
Garage presence and capacity.
Lot size, with per-acre or per-square-foot values shaped by zoning and location.
Condition and quality. Fannie Mae uses a standardized quality scale from Q1 (custom-built, luxury materials) through Q6 (below basic building standards), and a parallel condition scale. When a comp sits a tier above or below the subject, the appraiser quantifies the market value of that difference.⁴
Upgrades and amenities. Pools, solar panels, and renovated kitchens get adjusted based on their contribution to market value, not installation cost. A $60,000 kitchen remodel does not automatically add $60,000 to a home’s value.

Location within a neighborhood also matters. A comp backing up to a busy highway will sell for less than an otherwise identical home on a quiet street, and the gap has to be quantified. Waterfront lots, mountain views, and parcels next to parks all carry premiums that vary by market. Appraisers isolate these values by finding matched pairs of sales where two similar homes differ mainly in location or view, letting the price gap reveal what buyers pay for the advantage.

Step 4: Adjust for Market Conditions and Seller Concessions

Physical differences are only half the picture. Two other factors, unrelated to bedrooms or square footage, can move a comp’s usefulness significantly.

Market Condition Adjustments

If local prices have moved since the comp sold, the raw sale price no longer reflects today’s market. Appraisers handle this with a market condition adjustment, sometimes called a time adjustment. The calculation compares the overall price trend in the area against what happened to the comp’s value between its contract date and the appraisal date. When the broader market appreciated faster than the comp’s price reflected, the appraiser adjusts upward. When the comp’s price already captured more appreciation than the trend supports, the adjustment goes down.⁵

For example, if the local market rose 7% over the past year and a comp sold nine months ago at a price reflecting only 4% of that appreciation, the appraiser would add roughly 3% to align the comp with current conditions. These adjustments matter most for comps near the outer edge of the 12-month window or when the market has shifted sharply.

Seller Concessions

A comp that sold for $350,000 where the seller also paid $12,000 of the buyer’s closing costs did not truly trade at $350,000 in the open market. The concession inflated the recorded price. The adjustment isn’t automatically a dollar-for-dollar subtraction, though. Freddie Mac guidance states that the adjustment should approximate “the market’s reaction to the financing or concessions,” which may be equal to, less than, or greater than the concession amount.⁶

Fannie Mae also caps how much an interested party can contribute on conventional loans, based on loan-to-value ratio and property type:

Primary residence or second home, over 90% LTV: 3% of the sale price or appraised value, whichever is lower.
Primary residence or second home, 75.01% to 90% LTV: 6%.
Primary residence or second home, 75% or below LTV: 9%.
Investment property, any LTV: 2%.

Concessions above these limits must be deducted from the sale price before the property can serve as a comp.⁷ Concession details are often invisible in public records, which is one of the practical reasons MLS data carries more weight.

Step 5: Check Whether Your Adjustments Are Too Heavy

The more you adjust a comp, the less it actually tells you about the subject. FHA appraisal guidelines set preferred thresholds that many conventional lenders also reference:

No single line-item adjustment should exceed 10% of the comp’s sale price.
Net adjustments, meaning positive and negative adjustments after they offset, should not exceed 15%.
Gross adjustments, meaning the sum of the absolute value of every adjustment, should not exceed 25%.

Blowing past any of these thresholds doesn’t automatically disqualify the comp, but the appraiser has to explain why it’s still reliable.⁸ If all three of your comps exceed the limits, the selected properties are probably too different from the subject and better options should be found before finalizing the analysis.

Step 6: Reconcile the Adjusted Prices Into a Single Value

After adjustments, each comp produces its own adjusted sale price. The temptation is to add them up and divide by three. Fannie Mae explicitly prohibits that. Their guidelines state that reconciliation “must never be an averaging technique,” with the narrow exception of a weighted average that includes a proper explanation of how the weights were assigned.⁹

Reconciliation is a judgment call. Evaluate which comp required the fewest and smallest adjustments, which is most physically similar to the subject, and which sale best reflects current market conditions. That comp gets the most weight. A nearly identical home that needed only a minor lot-size adjustment carries far more significance than a comp that required corrections for square footage, condition, garage, and market timing. The final value opinion leans toward the strongest indicator, not the mathematical middle.

What to Do When Comps Are Scarce

In rural areas, markets with unusual housing stock, or neighborhoods where turnover is low, finding three solid comps within a standard radius and timeframe can be hard. Appraisers respond by expanding the search along one or more of three dimensions: reaching farther back in time, looking in more distant but competing neighborhoods, or widening the physical criteria to include less similar homes that still reflect buyer behavior in the area.

Each choice has trade-offs. Older sales require more aggressive market condition adjustments. Distant comps may cross school district or municipal lines that define different submarkets. Less similar properties need heavier physical adjustments, pushing closer to the net and gross limits. Most lenders will accept comps older than 12 months if the appraiser explains why no recent alternatives exist and supports the time adjustment with data. The goal is to pick the expansion path that best preserves the connection between the comp and the subject property’s actual buyer pool.

If an Appraisal Comes In Low

When an appraisal lands below the expected value, borrowers aren’t stuck with it. The Consumer Financial Protection Bureau confirms that homebuyers and homeowners can request a “reconsideration of value,” or ROV, asking the lender to take another look. You can point out factual errors, identify comps the appraiser missed or inappropriate comps that were used, or provide evidence that the valuation was influenced by prohibited bias.¹⁰

The strongest ROV requests come with homework already done. Pull two or three recent sales the appraiser didn’t use, explain why they’re better comps than the ones in the report, and note factual mistakes like an incorrect bedroom count or missing square footage. Arguing that the number feels too low carries no weight. Lenders evaluate whether the new data would materially change the appraiser’s conclusion, so the additional comps need to support a higher value using the same adjustment framework above.

Federal law also protects against discriminatory valuations. The Fair Housing Act and the Equal Credit Opportunity Act prohibit appraisers and lenders from allowing race, ethnicity, or other protected characteristics to influence a home’s valuation, and lenders can’t rely on an appraisal they knew or should have known was discriminatory.¹¹ If bias may have played a role, the ROV process is one route, and filing a complaint with the CFPB or HUD is another.

1
Fannie Mae. B4-1.3-08, Comparable Sales
2
National Association of REALTORS®. Multiple Listing Service (MLS): What Is It
3
Fannie Mae. Adjustments to Comparable Sales
4
Fannie Mae. Uniform Appraisal Dataset Condition and Quality Rating Definitions
5
Fannie Mae. Market Condition Adjustments
6
Freddie Mac. Considering Financing and Sales Concessions: A Practical Guide for Appraisers
7
Fannie Mae. Interested Party Contributions (IPCs)
8
HUD. 4150.2 4 The Valuation Process
9
Fannie Mae. Valuation Analysis and Reconciliation
10
Consumer Financial Protection Bureau. Mortgage Borrowers Can Challenge Inaccurate Appraisals Through the Reconsideration of Value Process
11
Consumer Financial Protection Bureau. Protecting Homeowners From Discriminatory Home Appraisals