Comps, short for comparables, are recent sales or leases of similar properties used to estimate what a subject property is worth or what rent it should achieve. They are the market evidence behind a valuation.
What makes a good comparable
- Similar property type and use. An apartment building is compared with apartment buildings, not with retail.
- Similar size, age and quality. A 300-unit building and a 20-unit building trade on different terms.
- Same market or a similar one. The same submarket first, then comparable areas.
- Recent. Market conditions change, so the date of the sale matters.
- Arm's-length. A sale between related parties or a distressed transfer may not reflect the market.
What is compared
For sales: price, price per unit or per square foot, the cap rate where the income is known, date, and the buyer's financing if known. For leases: rent per square foot or per unit, term, concessions and who pays which expenses.
Adjustments
Comps are rarely identical. Analysts adjust for differences in location, condition, size, tenancy and timing, and state each adjustment. The aim is to show how the subject would have traded under the same conditions.
What makes a comp set trustworthy
Every comparable should show its address, date, price, size and the source it came from, so a reader can verify it. A set that is small, old, or built from properties that differ in obvious ways should say so. A range of values from the comps, with the weighting explained, is more useful than a single average.