KW Default Solutions
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The comps you choose are the evidence behind that price. A comparable property, or comp, is another property that helps show how yours competes for buyers. The subject is the property you're valuing.
The closest sale isn't automatically the best comp. A house around the corner can still appeal to a very different buyer because of its layout, condition, property type or setting.
The steps below are how we teach it at KW Default Solutions (KWDS). We train Keller Williams agents on default work like BPOs. These steps are a starting point. If your assignment's rules say something different, follow the assignment.
By the end, you'll be able to: pick a starting set of comps, explain each one in a short comment and check that the set holds together.
1. Start with the subject's story
Before you search, decide where the subject fits in its neighborhood. Is it below average, typical or one of the better homes nearby? Is it a starter home, a move-up home or something less common for the area?
Then confirm what you can: property type, size, layout, age, lot and whatever condition information you actually have. If the assignment is exterior-only (you only see the outside), say so clearly in your notes. A listing that showed a renovation five years ago doesn't tell you what the inside looks like today.
Your comps and adjustments should support that story. An adjustment is a change you make to a comp's price to account for a difference, like an extra bedroom. Your grid is the table where you compare and adjust comps. If your finished grid says a plain, original-condition house is worth more than every updated home around it, recheck the key differences, adjustments and evidence. If a supported reason explains it, such as size, lot or location, say so in your comments. And stick to facts about the property and the market, not assumptions about the people who live in an area.
2. Bracket the subject
For each key feature, like size, age or condition, try to find one comp that's a little worse than the subject and one that's a little better. That's called bracketing. It puts the subject between two known sales instead of off to one side. So you're estimating between two points instead of guessing past one.
Fictional example: if the subject is 1,600 square feet, look for one comp a bit smaller and one a bit larger, like 1,500 and 1,700 square feet.
3. Start with three sold and three active or pending comps
In our training, a good starting set is three sold comps and three active or pending comps. Each kind tells you something different:
- Sold comps show completed sales.
- Active listings show what sellers are asking and what buyers can choose from right now. An asking price isn't a sale price.
- Pending listings are under contract. They show current buyer activity, but the listed price doesn't tell you the final sale price.
Label each comp's status and date correctly. That way the reviewer (the person who checks your BPO for the client) knows what each one adds.
Match property type and age where you can, like a two-story with a two-story and a newer build with a newer build. Be careful about crossing a major barrier like a freeway or a river. Homes on opposite sides can compete in different markets. If the assignment says something different about how many comps, how far away or how old the sales can be, follow the assignment.
4. When sales are thin, widen the search in order
Sometimes there aren't enough good sales nearby. In our training, you widen the search in this order: the date range first, then the distance, then the property subtype (the specific kind of home). Take one step at a time, and look at similar subdivisions right next door before you go across town.
Then write down why you widened it. A reviewer can follow a wider search when the reason is clear. A comment might read: "Limited recent sales in the subject subdivision; used similar product in the adjacent subdivision built by the same builder in the same time frame." If the assignment requires approval for an exception, get it.
A fictional example: a close comp and a better match
Say the subject is a modest house with its original layout, and no one has verified the inside. Comp A is very close, but it's larger and was extensively renovated. Comp B is a bit farther away and has a similar size and layout, but its condition information is incomplete. (All fictional.)
Often, you use both. Comp A shows the neighborhood baseline, meaning what's selling right around the subject. Comp B shows how the market prices a home with the subject's features. Give each comp a job and say what it is in your comments:
- "Comp A is closer in distance but larger and renovated; included to show the neighborhood baseline, not as evidence the subject is renovated."
- "Comp B is slightly outside the initial search area but closely matches the subject's size and layout; condition information is incomplete. It is weighted more heavily only if [the evidence that supports that choice], and the condition gap is noted as unresolved."
Comments like these show the reviewer that you looked at distance and still put similarity first. Keep in mind that a difference between two homes doesn't come with a set dollar amount. Back up any adjustment with local evidence and say where it came from.
5. Check your comps as a group
Once your comps are adjusted, look at them together. Do they land close to each other? Does your price sit inside that range, or near it for a reason you can explain? If one comp is way off from the rest, ask whether it belongs. It may need a better explanation, or it may need to go. You want a set of comps that makes sense together, even if the math isn't perfect.
Try this today
Pick one comp in a practice report that only you will see and finish this sentence: "This property belongs in the analysis because..." If your only answer is "it's nearby," go back to the subject's story, the bracket and the better match, and try again.
If you're working on a BPO and want a second set of eyes on your comps, reach out. We're happy to help. Contact KW Default Solutions