Comparable sales. How to read them properly, and the four mistakes buyers make.

A comparable sale is the foundation of property valuation. Banks use them. Valuers use them. Real estate agents use them. Buyers should use them. The problem is that comparable sales are routinely misused, often producing valuations that are 5-15% off the actual market level.

This post is the comparable sales primer: what makes a sale actually comparable, the four most common mistakes buyers make, and the framework for reading comparables properly.

What makes a sale comparable

A comparable sale must match the target property across multiple dimensions:

Dimension 1: location

The most important dimension. "Same suburb" is not enough. Comparable sales should be:

• In the same street or immediate surrounding streets, OR
• Within 500-1000m and on the same side of major dividing infrastructure (highway, railway, river, school catchment)

A sale 1km away in a different school catchment is not comparable to a sale across the street even if both are in the same suburb.

Dimension 2: dwelling type and size

• Same dwelling type (house, apartment, townhouse, duplex)
• Similar floor area (within 10-15%)
• Similar bedroom and bathroom count
• Similar lot size (for houses)

A 4-bed house is not comparable to a 3-bed house even in the same street.

Dimension 3: age and condition

• Similar age of construction
• Similar condition (renovated, original, run-down)
• Similar quality of finishes

A renovated 1920s house is not directly comparable to an unrenovated 1920s house. Adjustments are required.

Dimension 4: time

The sale should be recent enough to reflect current market conditions:

• 3 months: ideal
• 6 months: acceptable with market adjustment
• 12 months: usable with substantial market adjustment
• 24+ months: limited usefulness

In rapidly moving markets, even 3-month-old sales may require adjustment.

Dimension 5: orientation and aspect

• Similar orientation (north-facing vs south-facing in residential terms)
• Similar aspect (view, outlook, slope)
• Similar exposure (busy road vs quiet street)

A north-facing rear yard is worth different money to a south-facing rear yard, even on otherwise identical properties.

Mistake 1: cherry-picking the high or low comparables

Real estate agents marketing a property cherry-pick high comparables to support the asking price. Buyers wanting to negotiate often cherry-pick low comparables to support a lower offer.

Both are wrong.

The correct approach:

• Identify 8-12 candidate comparable sales
• Apply the comparability tests above
• Discard non-comparable sales with documented reason
• Use the remaining 4-6 sales as the comparable set
• Calculate a range, not a point estimate

The actual market value typically sits within the comparable range. A point estimate often misses the mark by 5-10%.

Mistake 2: ignoring sale conditions

Not all sales reflect "open market" conditions. Sales that should be discounted or excluded:

Excluded sales

• Related party transactions (family transfers, gifts at nominal price)
• Mortgagee-in-possession sales (forced sale, typically below market)
• Off-market transactions (limited price discovery)
• Internal staff or company transfers

Adjusted sales

• Auction with limited bidders (may understate market)
• Hot auction with multiple bidders (may overstate market on day)
• Vendor-finance or special terms transactions
• Sales with substantial included or excluded chattels

A "sold for $1.2M" comparable is not the same value if the sale included a $80,000 boat included in the price.

Mistake 3: failing to adjust for differences

Even genuinely comparable sales require adjustment for the differences. Common adjustments:

Size adjustment

If the comparable is 200sqm and the target is 180sqm, an adjustment for the 20sqm difference is needed. Adjustment rate depends on the local market (typically $5,000-15,000 per 10sqm in residential).

Bedroom/bathroom adjustment

Adding a bedroom or bathroom typically adds 5-15% to value. Removing one subtracts similar amount.

Condition adjustment

• Renovated kitchen and bathroom: +$30,000-80,000
• Recent full renovation: +$80,000-200,000
• Run-down condition: -$30,000-100,000 (depending on extent)

Position adjustment

• Quiet street vs busy road: 5-15% difference
• North-facing vs south-facing: 5-10% difference
• Elevated/view vs flat/no view: 5-25% difference
• Corner lot premium or discount: 0-10% depending on suburb

The adjustments require judgement and local knowledge. A property without adjustments calculated is a comparable that has not been properly used.

Mistake 4: confusing asking price with sale price

Asking prices are aspirational. Sale prices are actual.

Buyers reviewing comparables should:

• Use actual sale prices, not asking prices
• Compare asking price to eventual sale price for properties in the same market
• Calculate the typical asking-to-sale ratio in the local market

In hot markets, properties may sell 5-15% above asking. In cool markets, properties may sell 10-20% below asking. Understanding the ratio in the current local market is essential to using asking prices for context.

How to source comparable sales

Free sources

• realestate.com.au "Sold" filter
• domain.com.au "Sold" filter
• onthehouse.com.au

These provide most residential sale records but with delayed reporting (typically 2-6 weeks lag).

Paid sources

• CoreLogic / RP Data professional access
• Property Insights
• Independent valuer's comparable sales report (commissioned)

Paid sources provide more timely data, more complete coverage, and additional context (chattels, settlement terms).

Council and government sources

• State land registry sale records (typically 6-12 weeks lag)
• ATO sales database (limited public access)

Local knowledge

• Auction attendance and observation
• Real estate agent conversation (note bias)
• Neighbour and community knowledge
• Local valuer informal advice

The 5-step comparable sales framework

For any property purchase:

Step 1: identify candidate sales

Use 2-3 sources to identify 10-15 candidate sales in the local area over the past 6-12 months.

Step 2: apply comparability tests

Filter candidate sales using the comparability dimensions. Reject sales that fail multiple tests.

Step 3: investigate sale conditions

Check whether the sales are open market. Exclude or flag related party, mortgagee, or otherwise non-market sales.

Step 4: calculate adjustments

For each comparable, calculate the adjustments needed to make it directly comparable to the target. Apply the adjustments to derive an adjusted comparable value.

Step 5: derive a range

The adjusted comparable values typically cluster within a range. The actual market value of the target property sits within that range.

The range, not a point estimate, is the basis for offer and negotiation.

Common comparable sales numbers

For a typical suburban Sydney/Melbourne house purchase:

• Comparable sales reviewed: 12-15
• Genuinely comparable after filtering: 4-6
• Adjusted comparable range: typically 10-15% wide
• Confident point estimate: typically within 5% of range midpoint

If your comparable range is wider than 20%, your comparables are not actually comparable. Restart with better filtering.

For final purchase decisions on substantial transactions, a paid valuation report from an independent valuer remains the most rigorous approach. SafeBuy data supports the buyer's preliminary analysis and complements rather than replaces a formal valuation.

Comparable sales analysis is the foundation of informed property purchase. Done properly, it tells you what the property is actually worth in the current market. Done improperly, it produces a number that supports whatever conclusion the user wanted to reach. The discipline of proper comparable sales analysis is the difference between paying market value and paying 10% too much.