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What is a Comparable for Property Valuations?

By John Carter

Comparable Property For Valuation

Whether you’ve heard of comparable properties from a real estate agent or while ordering a valuation, it doesn’t hurt to have a good understanding of what a comparable is before your next property valuation in Perth.

In short, a comparable is a property that is very much like the property being valued. That is, they are the same size, share the same features and most importantly, be in the same area.

Qualities of the ideal comparable property:

There are certain qualities a comparable property must have so that a valuer can produce an accurate property valuation report. The ideal comparable property would:

  • Be located within 5 km: Many location-specific factors will influence the value of a property including such things as the suburb’s reputation and the available local amenities. For best results, a property valuer will use comparable properties that are in the same suburb/city and within 1 km. If need be, they can extend their search into properties that are within a 5 km radius.
  • Have the right features: Do both properties have the same number of rooms, have an inground pool and have the same number of solar panels? Then they are likely to be comparable.
  • Roughly be in the same condition: If a property has been neglected or is in disrepair then it should not be compared to a property that has been newly renovated. Buyers would not pay the same price for these properties meaning their market value would not be similar.
  • Be about the same size: the size of the comparable is a key element of the calculations for the subject property’s value. For the most precise valuation, a comparable property would be the same size in square meters.
  • Be the same type of property: All of this would be moot if both properties are not the same type. The ideal comparable for a residential standalone single-story home would be another residential property of similar construction. Residential property should never be compared to commercial property. Nor should a house be compared to an apartment complex.

How valuers use comparable properties:

A property valuer uses comparable properties when using the direct sales comparison method. This is also known as the comparison approach. This is one of the most common valuation methods and is widely accepted in several circumstances. In fact, when proving your property value to the valuer-general or the ATO, the use of the comparable sales valuation method is recommended.

With the direct sales comparison method, a valuer uses comparable property sales from the last 6 months. This is combined with the average price per square meter of these properties to determine the value of your property.

It is a standard practice to use about 3 comparable properties when using this valuation method. We always strive to create the most accurate property valuation possible and as such, we generally use 4-6 comparable properties when completing a report.

For more about how our API-certified valuers use comparable properties, speak with one of our specialists today. We’d be happy to discuss how we conduct your property valuations.