VA LOAN CAPTAIN BLOG & Learning Center

What’s a Comp?

By: Grant Moon 04/20/15 10:59 am

What, exactly, is a “comp?” VA appraisals are full of them, but what are they? A comp is short for “comparable sale” and is used to support the sales price of a property or to establish a value for a refinance. Without comps, there can be no VA loan, regardless of the quality of the borrower or the amount of down payment. No comp, no loan.
Lenders order an appraisal from an appraisal management company who then contacts a VA approved appraiser. Lenders aren’t allowed to order an appraisal directly, this an attempt to shield the appraiser from any undue influence. The appraiser then researches the local multiple listing service, or MLS as well as public records to look for properties that have sold within the previous 12 months. There should be at least three properties sold within that time frame with ideally one of those within the previous six months.
Comps should be similar to the subject property. For instance, a two story home shouldn’t be used as a similar comp for a one story home. A duplex can’t be compared to a single family home, either. Comps should be of similar nature and construction. In addition, such comps should be as close to the subject property as possible. If one home sold for $100,000 and a similar property sold for $125,000, all things being equal, or at least as equal as they can possibly be, the home closest to the subject property should be used first.
An appraiser can’t use a comp that is further away from another to justify the value one way or another. Using a comp in another subdivision when a better comp is located in the same neighborhood won’t be accepted, either. No two single family homes will be exactly alike. They can even have the same floor plan but the condition of the home, perhaps a view and an updated bath or kitchen can influence a value.

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