How Comparable Sales Are Selected (and Why They Matter) in Ontario Property Appraisals

Ever wondered how appraisers determine your home's value? The answer often lies in comparable sales — but the process is more nuanced than you might think.

Comparable sales — often referred to as “comps” — are a core component of most real estate appraisals. Whether an appraisal is prepared for mortgage financing, estate settlement, divorce, capital gains reporting, or any other purpose, the selection and analysis of comparable sales plays a central role in forming a credible opinion of value.

Understanding how comparable sales are chosen, and why they matter, can help property owners, lenders, and advisors better interpret appraisal reports and appreciate how professional judgment is applied in valuation work.

What Are Comparable Sales?

Comparable sales are recent property transactions that share meaningful similarities with the subject property. They are used to estimate what a typical buyer would have paid for the subject property under market conditions as of the effective date of the appraisal.

Key characteristics typically considered include:

• Location and neighbourhood

• Property type and use

• Size and layout

• Age, condition, and construction quality

• Lot characteristics and zoning

• Functional features such as garages or finished basements

Comparable sales form the basis of the direct comparison approach, which is widely used in both lending and non-lending appraisals.

Why Comparable Sales Matter in Appraisals

Comparable sales help anchor an appraisal to actual market behaviour. Rather than relying on speculation, appraisers analyze verified transactions to understand how similar properties have been valued by buyers and sellers in the open market.

Well-selected comparable sales contribute to consistency and reliability in an appraisal, reduce reliance on unsupported assumptions, enhance transparency for report users, and support defensibility when the appraisal is reviewed or relied upon by third parties.

For these reasons, comparable sales are closely examined in lending decisions, legal proceedings, and tax reviews alike. So how do appraisers select these sales? Several key factors come into play.

Key Criteria Used to Select Comparable Sales

Appraisers apply several overlapping criteria when selecting comparable sales. No single factor determines suitability; rather, relevance is assessed holistically.

1. Timing of Sale

Comparable sales should occur reasonably close to the appraisal’s effective date. This is especially important in changing markets or when the appraisal is prepared retrospectively for a past date.

2. Physical Similarity

The closer a sale matches the subject property in size, age, layout, and condition, the more useful it is as a comparison. Significant differences typically require adjustments.

3. Property Location

Sales from the same neighbourhood are usually preferred. Where this is not possible, sales from similar or competing areas may be considered, with appropriate explanation.

4. Neighbourhood Age

Properties from the same era often share similar lot sizes, layouts, and construction features. This means a sale from a nearby neighbourhood of similar age may be more relevant than a physically closer property built in a different period.

5. Market Conditions

Appraisers consider broader market trends, such as rising or declining prices, supply and demand, and buyer behaviour at the time of sale.

How Appraisers Use Adjustments To Interpret Market Value

Even the best comparable sales are not identical to the subject property. Adjustments are applied to reflect differences that would influence market value.

Common adjustment areas include:

• Gross living area

• Overall condition

• Bathroom count and basement finish

• Garages

• Lot size and utility

• Site and street influences

Adjustments are based on market evidence and professional judgment. Their purpose is not to force a value, but to place the comparable sale on a basis consistent with the subject property.

Comparable Sales in Lending and Non-Lending Appraisals

While the intended use of an appraisal may vary, the underlying principles for selecting comparable sales remain consistent.

• Lending appraisals focus on current market value to support financing decisions. Lenders may have specific appraisal policies that affect comparable selection.

• Non-lending appraisals may involve historical dates, legal definitions of value, or specific reporting requirements.

In all cases, the appraiser must select sales that are relevant to the assignment’s purpose and explain their reasoning clearly.

When Comparable Sales Are Limited

In some markets or for unique properties, truly comparable sales may be scarce. In these situations, appraisers may:

• Expand the search area or time frame

• Use sales with greater differences and apply adjustments

• Place additional emphasis on other valuation approaches, where appropriate

When comparable sales are limited, documentation and explanation become especially important to ensure the appraisal remains credible.

Common Misunderstandings About Comparable Sales

“The closest sale is always the best comp.”

Proximity matters, but similarity in features and timing can be more important.

“Online estimates use the same comps as appraisers.”

Automated tools may reference some basic sales data, but they lack the contextual analysis and judgment applied in professional appraisals. The data used for these tools is often outdated and inappropriate for the type of property and appraisal assignment under consideration.

“More comparable sales automatically mean a better appraisal.”

Additional comparables can provide extra market data to support the value conclusion, but quality and relevance of sales are more important than quantity.

Frequently Asked Questions

Can two appraisers select different comparable sales?

Yes. Appraisers may reasonably differ in which sales they consider most relevant, particularly in complex or changing markets. What matters is whether the selections and adjustments are well supported and clearly explained.

Do comparable sales guarantee a specific value?

No. Comparable sales inform an opinion of value, but professional judgment is required to interpret how differences between properties affect market value.

Are comparable sales reviewed in lending and legal contexts?

Yes. Comparable sales are often reviewed closely by lenders, lawyers, courts, and tax authorities as part of their evaluation of an appraisal report.

Final Thoughts

Comparable sales are not merely data points—they are the foundation of a well-supported real estate appraisal. In Ontario, careful selection, thoughtful adjustment, and clear explanation of comparable sales support reliable opinions of value across both lending and non-lending assignments.

When comparable sales are chosen and analyzed with appropriate care and transparency, appraisal reports are better positioned to support informed decision-making and withstand review by lenders, legal professionals, and tax authorities.

Have questions about how comparable sales apply to your property appraisal? Contact Apex Appraisal for expert guidance tailored to your specific needs.