The process, step by step
- Step 1
Choose comparable sales
A comparable sale is a recent sale of a property similar to yours. Good comparables resemble the home in size, style, condition and site, and they come from the same market area where possible. The Fannie Mae Selling Guide, which governs mortgage loans sold to Fannie Mae, requires at least three closed comparable sales and says sales closed within the last 12 months should be used. Those numbers are mortgage-program requirements and not rules for every appraisal, but they show the kind of evidence a careful report offers.
The same guide asks the appraiser to state the specific data source for each sale, such as tax or deed records, and not a broad category like public records. A report that names its sources is easier to check.
- Step 2
Compare the features
The appraiser lines up the features that buyers pay for: location, finished area, room count, style, condition, upgrades and the site. The Selling Guide names site, room count, finished area, style and condition as characteristics for comparing properties. Which features matter most depends on the market and the property, so no list ranks them for every home.
- Step 3
Adjust for differences
If a comparable has an extra bathroom or a newer kitchen, the appraiser adjusts its price to reflect that difference. The Selling Guide says adjustments should reflect the market's reaction to the differences and should be supported by market evidence, not by a rule of thumb, and that time adjustments should rest on indices or statistical analysis. The size of an adjustment is therefore a finding from the market, and a reader can ask how it was derived.
- Step 4
Reconcile to one value
After adjusting, the comparable sales point to a range. The appraiser weighs how closely each one resembles your home and states a single opinion of value with the reasoning. The report explains why one sale carried more weight than another.
How market conditions enter
Prices move over time, so the effective date matters. The appraiser considers closed sales, contract sales and listings, and describes the direction of the market as of the date. The article on market trends and appraised value explains this part.
What a reader can check
- Are the comparable sales close in time, place and character to your home?
- Does the report name the source of each sale?
- Do the adjustments move in the direction you would expect?
- Does the description of your home match the facts?
If something is wrong, tell the appraiser in writing and attach proof. The five-step visit that precedes all of this is described in how a home appraisal works.
Frequently asked questions
Does every appraisal use three comparable sales?
No. Three closed comparables is a Fannie Mae requirement for loans sold to Fannie Mae. Other assignments follow their own scope, and the report states what it used.
Why do comparable sales need adjustments?
Because no two homes are identical. Adjustments express the market's reaction to the differences between a comparable and your home.
Can I suggest comparable sales?
You can give the appraiser information, and the appraiser decides what is reliable and comparable. Give sources, not just opinions.
Is a higher number better?
The report states what the evidence supports as of a date. A number that the evidence does not support is not useful to anyone relying on it.