How Old Can Comps Be for an Appraisal?

Real estate appraisals rely on comparable sales, often called “comps,” to establish a property’s market value. These properties are homes with similar characteristics that have recently sold in the same or a competing market area. Analyzing these sales is key to valuing a subject property. The age of these comparable sales directly impacts their relevance to current market conditions.

General Guidelines for Comparable Age

The general guideline for comparable sales in a real estate appraisal suggests using properties that closed within the last six months. This timeframe helps ensure the data reflects current market dynamics. However, this is a guideline, not an absolute rule, and appraisers have flexibility based on market circumstances.

Appraisers may extend their search to include sales closed up to 12 months prior to the appraisal date, especially when recent sales are limited. Using sales older than six months requires specific justification. Major lending institutions, such as Fannie Mae and Freddie Mac, generally require comparables to have closed within the last 12 months. They also emphasize that the most appropriate comparable sales may not always be the most recent, particularly if an older sale better indicates value for the subject property.

Factors Influencing Comparable Age Selection

Several factors influence an appraiser’s decision to use older comparable sales. Market conditions play a role; rapidly changing markets require current sales data. Conversely, in stable or slow-moving markets, older sales might still accurately reflect prevailing values.

The type and uniqueness of a property also impact comparable selection. Properties with specialized features, unique architectural styles, or those in rural areas may have a smaller pool of recent comparable sales. Appraisers may need to look further back to find suitable comparisons in such instances. Data availability is another consideration; a scarcity of recent, relevant sales can compel an appraiser to expand the search. Location, like urban versus rural settings, also affects sales activity density, influencing acceptable comparable age.

Appraiser’s Justification and Reporting

When an appraiser uses comparable sales older than the typical six-month guideline, thorough justification is required in the appraisal report. This justification explains why more recent sales were not suitable or available, and how the selected older sales still provide a credible indication of value. The appraiser’s analysis may involve discussing market trends during the period the comparable sold, including any significant appreciation or depreciation.

This justification often involves “time adjustments” to older comparable sales. These adjustments account for changes in market value between the comparable’s sale date and the appraisal’s effective date. For example, if property values have increased, an older comparable’s sale price might be adjusted upwards to reflect current trends, ensuring the appraisal remains accurate. The Uniform Standards of Professional Appraisal Practice (USPAP) requires appraisers to produce credible results and clearly report their methodologies, including any extraordinary assumptions or hypothetical conditions used.

The appraiser’s market analysis, assessing factors like absorption rates, inventory levels, and price trends, supports the validity of chosen comparable sales, regardless of age. Lenders and underwriters review this detailed justification to ensure the appraisal meets their requirements for loan approval. This process ensures that even when older comparable sales are used, the final valuation remains well-supported and reflective of current market conditions.