Myth: “Comps are king.”

Truth: Although comparable sales are an important part of any real estate appraisal, one cannot simple look at the sale price of similar properties and credibly determine the value of the subject.

The process of comparative analysis requires that the appraiser locate the “best” comparables available within certain search parameters. But often, the best comparables are still inadequate to derive better than a general value indication, or range of values. Other factors are considered in the valuation of any property, including its potential income and alternative legal and possible uses. An appraiser must consider the highest and best use of a property and the most likely buyer. Afterwards, the appraiser may find that typical users of such properties rely on other valuation methods and not a direct comparative analysis. Even when comparable sales are employed, they are thoroughly examined and adjusted for many differences in order to derive a final indication of value. As a matter of fact, the comparables presented in an appraisal report may represent the best comparables available to the appraiser, but other comparables will likely have been considered as well, in order to extract the most meaningful adjustment factors applicable to the appraisal problem at hand.