In real estate appraisal, there is no standard definition of a comparable sale. There is no formal definition in the literature. Nobody has a practical definition, either. USPAP does not have one. Fannie Mae just assumes we all know what one is. But we don’t have a standard definition. That does not make sense, does it? So, what do we do? Do we invent our own definition? It is not that easy!

Since we do not define a comparable sale, what are we appraisers to do? About the best we can do is go with what we have. And what we have is, at best, a description. OK, a description of what? A description of the characteristics of a comparable sale. Fannie Mae, bless her bureaucratic heart, offers that description. She says a comp has the same legal, physical, and economic characteristics as the subject. Really clear, fight? NOT! But we go with what we have since we have nothing else.

Fannie says a comparable sale has a site similar to the subject’s site. That means they are highly similar when it comes to exposure, frontage & depth, access etc. In addition, a subject and a comp have similar room counts and a similar GLA. Their architectural styles and modes of construction are similar, too. Finally, the subject and its comps are in generally the same condition. Clear as mud, right!?

You know what’s silly? There is no definition of a comparable sale, but all the AMCs know when you picked the wrong ones! And do you know what’s even more interesting? The comps you should have chosen just happen to make the deal work! No conflict of interest, no subjectivity there, right! Yep, the appraiser is always wrong and the AMC is always right! Yes, the AMCs always choose the correct comps despite the fact there is no formal definition of a comparable sale!

But doesn’t Fannie Mae give the appraiser the discretion and choice to select a comparable sale? Yes, she does! This responsibility falls on the appraiser’s shoulders, not the AMC’s.