Sometimes, you just can’t find many comparable sales for your comparative market analysis. What do you do if you only find one or two or, worse, don’t find any at all?
Your best bet to find comps will be to start altering your search within geography and time.
Since location is a prime factor in value, you’ll first want to stay as geographically close to the subject property as possible.
So, for example, maybe you have a condo building or a specific neighborhood you’re researching. If there’s not a good comp in that building or area within the last 3 months, stick to the same area, but start going further back in time. Go to 6 months, 9 months, then to 12 months.
If I found a comparable unit in the same condo building as the subject that was 12 months old, my opinion is that this comp is more relevant than a 3-month old comp in a different condo building that was 7 blocks away.
For me, 12 months is about the maximum time limit that I will put into a CMA. This time period will depend on your local market conditions, but I start expanding the geographic range if I can’t find anything newer than 12 months.
Going back to my condo building example, if it was the case that there was a choice between a 24-month old comp in that building or a 3-month comp in a different building, I’d now start using the newer unit as my comparable even though it wasn’t the same building.
Of course, I’d need to now start making adjustments for what is different about these units. I need to compare not only location, but also bedrooms, bathrooms, square footage, garage space, and other relevant attributes.
Let’s say though that you’ve got a property that’s a single-family home in a subdivision with various home designs and layouts and styles. If I didn’t have a direct comparison that was newer than 6 months old, I’d start considering similar, but different, styles of homes that were in the direct area instead of going back further in time to find the same exact home style.
I’d do this because a subdivision typically has homes that are relatively similar in price, size, and attributes. Because a typical buyer isn’t usually dead-set on an exact style of home, you can substitute one 4-bedroom for another on a nearby block. Although they’re not exactly the same, they could be substitutions for each other in a buyer’s mind. Therefore, I’d pick the more recent comp as my primary gauge as long as they have some significant similarities.
Of course, determining value is both an art and a science. Your own individual skill and expertise plays a big role here in determining what kinds of adjustments you should make and how you should apply them.
In the end, your approach should be to gather as much information as possible. Once you have as many relevant data points as you can find, start sorting them to see what makes most sense in your exact situation.
As a summary, stick to nearby geography first. Go back further in time, if needed. If that doesn’t yield results, start expanding the geographic range you’re searching in and apply necessary adjustments to make them as equal as possible.
What would you suggest in this situation? Would you do anything differently? Leave a comment and let us know what you do when you can’t find a great comp for a new property you’re working.