Comparable Sales

Comparable Sales — the cornerstone of most property valuation methods. Appraisers, brokers, and note investors identify recently sold properties that closely match the subject property in key characteristics such as square footage, bedroom and bathroom count, lot size, age, condition, and proximity. Adjustments are made for differences between the comps and the subject to arrive at an estimated fair market value.

When purchasing mortgage notes on the secondary market, investors rely on comparable sales to gauge whether the collateral property adequately secures the debt. Strong comps from the past three to six months in the same neighborhood provide the most reliable value indicators. Weak or sparse comp data — common in rural areas or unique property types — introduces valuation uncertainty that note buyers must factor into their pricing and risk analysis.