Real estate comps (comparables), explained

Sales comps vs. rental comps

One tells you what a property is worth; the other tells you what it will rent for.

Sales comps estimate what a property would sell for on the open market, either its current as-is value or its ARV after renovations. You use sales comps to price an offer, underwrite a flip, or support an appraisal. They come from closed sales, not listing prices. Pending sales and active listings give directional information but are not the same as closed data.

Rental comps are recently leased properties used to estimate market rent for a subject unit. You use them to underwrite cash flow on a new acquisition, set an asking rent, or check whether an existing tenancy is at-market. Rental comps come from lease data; active listings on the major platforms are a reasonable proxy in liquid markets but reflect asking prices, not signed leases.

Flipping generally relies on sales comps. Buy-and-hold investing needs both: sales comps to establish what you’re paying relative to value, rental comps to underwrite income.

What makes a comp reliable

A comp is only as good as it is similar to the subject. Four things drive that:

Proximity. The best comps sit in the same neighborhood, ideally within a quarter to half mile in urban markets. A comp across a major highway, in a different school district, or at a noticeably different price point for the area is weaker, regardless of raw distance.

Recency. A sale from eight months ago in a market that has moved 5% tells you less than one from last month. In slow or stable markets, 12 months is workable with appropriate adjustment. In volatile markets, push for three to six months.

Physical similarity. Square footage, bedroom and bathroom count, lot size, year built, and garage count all affect value. The smaller the adjustments needed to reconcile the comp to the subject, the more useful the comp. A 1,400 sqft comp used to value a 1,100 sqft subject requires an adjustment that introduces estimation error, because the per-square-foot adjustment rate is itself an assumption.

Arm’s-length transaction. Foreclosure sales, estate sales at a discount, and sales between related parties can look like comps but reflect circumstances rather than market value. Filter them out or adjust aggressively.

Making adjustments

When a comp differs from the subject property, appraisers adjust the comp’s price up or down to estimate what it would have fetched if it were the subject. The adjustment amounts come from paired-sale analysis: comparing similar properties that differ on one specific attribute to isolate what the market pays for that attribute.

A simplified example: two otherwise identical houses on the same block, one with a two-car garage (sold for $285,000) and one without (sold for $271,000). The market’s implied value for the garage is $14,000. An appraiser uses that pairing to adjust any other comp whose garage differs from the subject’s.

Common adjustment categories:

• Gross living area (a per-square-foot value for the size difference)
• Bedroom and bathroom count
• Garage and parking
• Lot size (less relevant for attached or condo product)
• Condition and updates (kitchen and bath age, deferred maintenance)
• Year built
• Location within the submarket (backing to a busy road, proximity to amenities)

No comp is perfect. The goal is a set of adjusted sale prices that cluster around a reasonable range for the subject. Three comps that, after adjustment, land at $305,000, $298,000, and $312,000 give you a defensible estimate. Three that land at $285,000, $310,000, and $340,000 signal that either the comps aren’t truly comparable or there is genuine uncertainty in the market.

Using comps in your own underwriting

When pulling comps on an acquisition target, start with your county assessor’s office or an MLS feed for recent sales. Filter to closed sales in the prior six months, within a mile, and within 15–20% of the subject’s square footage. Check the condition notes or photos where available — a “comparable” that was fully renovated when the subject is distressed needs a significant adjustment downward before it works as an ARV benchmark.

For rental comps, listing rents are a starting point, not signed-lease data; a property manager or local agent can get you the latter. The gap between the two widens when the market softens.

CapScout lists each comp with its distance, sale date, and size next to the property metrics, so you can weigh the comps yourself instead of trusting one blended number.