Comparable sales
Comparable sales are recent transactions in similar properties near the subject, used to estimate what the subject is worth. They are the backbone of residential valuation and the input on which almost every property decision ultimately rests.
What makes one comparable#
Three qualities, in roughly this order of importance.
Proximity. Same neighbourhood, ideally same street. Value varies over short distances far more than people expect, and crossing a school district or a municipal boundary can change it sharply.
Recency. Recent sales reflect current conditions. Older sales need adjustment for market movement, and that adjustment is the least reliable part of the whole exercise.
Similarity. Size, age, style, condition, lot, bedroom and bathroom count.
Adjustments, and why fewer is better#
No two properties are identical, so each comparable is adjusted — plus for features the subject has and the comparable lacks, minus for the reverse.
Every adjustment is a judgement, and judgements accumulate error. Three well-matched comparables needing small adjustments produce a more reliable estimate than six poorly matched ones requiring large ones.
This is why unusual properties are genuinely hard to value. A four-thousand square foot house in a neighbourhood of bungalows has no good comparables, and no amount of adjustment fully compensates.
Where the method struggles#
Rural property, where the nearest similar sale may be miles away and months old.
Acreage, where land value does not scale linearly and a ten-acre parcel is not twice a five-acre one.
Thin markets, where too few transactions occur to establish a pattern at all.
Large parts of greater Minnesota have all three characteristics simultaneously, which is why valuation confidence there is meaningfully lower than in the metro area — and why a single unusual sale can distort a whole area's apparent values.
The distressed-sale question#
Whether foreclosure and forced sales belong in a comparable set is contested, and the honest answer is that it depends on how much of the market they represent.
Where distressed transactions are a small share, including them understates value. Where they dominate, excluding them describes a market that no longer exists.
Either way the effect on neighbours is real: a cluster of foreclosures pulls down the comparables available to every owner nearby, whether or not they are in any difficulty. It is one of the clearest mechanisms by which one household's distress becomes a neighbourhood's problem.
Where the data comes from#
Different parties draw comparables from different sources, which is one reason their conclusions differ.
Appraisers and agents work from multiple listing service data, which carries condition notes, photographs, days on market and whether concessions were given.
Automated models and public tools work from recorded sales and assessor records. Those show price and property characteristics but nothing about condition or what the interior looks like.
In Minnesota the recorded sale data flows through the electronic certificate of real estate value filed at conveyance, which is why that record underpins so much valuation work in the state — including our own. It is comprehensive and it is blind to condition, and both facts matter when reading any estimate built from it.