In the context of real estate, what are "comparables" used for?

"Comparables," or "comps," are key tools in the real estate valuation process. They refer to properties that are similar in characteristics—such as size, type, age, location, and amenities—that have recently sold in the same market. The primary purpose of using comparables is to assess the market value of a property based on sales data of these similar properties.

This method allows appraisers and real estate professionals to establish a fair market value for a property by comparing it to those that have recently sold. When evaluating a property, it is important to choose comparables that are as alike as possible to ensure accuracy in the valuation. This is especially critical in competitive markets where slight differences in characteristics can significantly impact price.

While comparables can play a role in different areas of real estate, they are not limited to appraising commercial properties, establishing market trends, or analyzing rent prices. The strength of the comparables approach lies in its focus on recent sales to gauge current market conditions accurately, making it a cornerstone of property valuation practices.