Comparable Sales (Comps)

Comparable sales — universally called "comps" — are recent sales of similar properties in the same area, used to estimate what a given property is worth. Comps are the foundation of the sales-comparison approach to valuation, the method behind most appraisals, broker price opinions, and automated valuation models. For note buyers, comps are how a property's fair market value — and therefore the equity cushion protecting the note — gets established during due diligence.

How comps are selected and adjusted

A good comp is as similar as possible to the subject property. Evaluators look for recent sales (typically within the last few months) that match on:

• Location — same neighborhood, school zone, and market
• Size — comparable square footage, bedrooms, and bathrooms
• Type and age — similar construction, style, and condition
• Lot and features — comparable land, garage, and amenities

Since no two properties are identical, the evaluator adjusts each comp's sale price up or down for differences (a comp with an extra bedroom is adjusted down to match the subject, etc.). The adjusted comps cluster around an estimated value for the subject.

Why comps matter to note value

The property is the collateral behind the note, so its value drives the LTV, ITV, and equity cushion a note buyer relies on. Comps are how that value is supported:

• Strong, recent, similar comps give the buyer confidence in the value → a firmer offer.
• Weak or sparse comps (rural areas, unique properties, slow markets) create valuation uncertainty → a more conservative offer to account for the risk that the property is worth less than hoped.

This is one reason notes on typical homes in active markets are easier to value (and often price better) than notes on unusual or rural properties where comps are scarce.

Comps and the distressed scenario

For a non-performing note, comps do double duty: they establish current value and help estimate the likely resale price if the holder forecloses to REO. Buyers may weight as-is or quick-sale comps for that scenario, since a distressed sale rarely matches full retail comps.

Comps vs. tax value vs. list prices

• Comparable sales: actual closed sale prices of similar properties — the gold standard.
• Tax-assessed value: the county's taxation figure, often not aligned with market value.
• List prices: what sellers are asking, not what buyers paid — useful context but weaker evidence than closed comps.

What it means when you sell

If you can provide recent comparable sales near your note's property — or a recent appraisal/BPO built on them — you give the buyer strong support for value, which helps your offer hold. Accurate detail on the property's condition, size, and features lets the buyer choose and adjust comps correctly. A well-supported value reduces uncertainty and is one of the simplest ways to back up the price your note deserves.