The Anatomy of An Appraisal: Part 4 — “Running the Numbers” How Appraisers Pin Down Value
In the world of home appraisals, determining the value of a single-family residence is both an art and a science. Appraisers don’t just pull numbers out of thin air – they “run the numbers” using a systematic method. The most common method for valuing single-family homes is the Sales Comparison Approach, which is especially central in modern Desktop and Hybrid appraisals where appraisers rely heavily on data. In a desktop appraisal, the appraiser completes the valuation entirely from their desk using data (like MLS listings and public records) without visiting the property . In a hybrid appraisal, a third-party data collector inspects the property (gathering photos, measurements, etc.), and then a certified appraiser completes the analysis remotely . In both cases – as well as in traditional appraisals – the key to pinning down value is a well-executed sales comparison analysis. This article will demystify how appraisers use the sales comparison approach, specifically focusing on the Sales Comparison grid (the heart of the appraisal report), and explain how adjustments are made and reconciled to arrive at a final value opinion. We’ll break down each part of the grid, show how appraisers quantify differences between properties (using techniques like paired sales and regression), and walk through a simple example of adjustments in action. By the end, homeowners, lenders, and agents will have a clearer understanding of what’s happening in that grid of numbers on an appraisal report.
What Is the Sales Comparison Approach?
The Sales Comparison Approach is one of the most critical tools in a residential appraiser’s toolkit. It’s widely regarded as the most reliable method for appraising single-family homes in most markets. At its core, the sales comparison approach is based on the Principle of Substitution – the idea that a knowledgeable buyer will not pay more for a property than it would cost to buy a similar substitute property with comparable utility. In practice, this means the appraiser looks at recent sales of comparable properties (“comps”) and analyzes their sale prices to infer the value of the subject property. Essentially, the market (through the prices of similar homes that sold) tells us what the subject home is likely worth.
Using the sales comparison approach involves a few key steps. First, the appraiser researches the market for recent sales and listings of properties similar to the subject in location, size, design, etc. Next comes selecting the best comparables – ideally sales that are as similar as possible to the subject in important features (same neighborhood, similar square footage, age, condition, etc.). Once comparables are selected, the appraiser analyzes differences between each comp and the subject property. Because no two homes are exactly alike, the appraiser will make adjustments to the sale prices of the comparables to account for those differences . The goal of adjustments is to essentially transform each comparable’s sale price into an “as if” price – what that comp would have sold for if it were identical to the subject. After adjusting the comps, the appraiser has a set of adjusted sale prices that indicate a range of value for the subject. The final step is reconciliation, where the appraiser examines the range of adjusted values and weighs the comparables (considering which ones are most similar and reliable) to arrive at a single final opinion of value for the subject property .
In sum, the sales comparison approach provides a systematic way to estimate value by analyzing recent sales of comparable properties . It reflects actual market behavior – what buyers and sellers have agreed to in the marketplace – making it a credible and defensible method for pinning down value. This approach is especially dominant in single-family residential appraisals, including desktop and hybrid assignments, because such properties often have plenty of comparable sales data to draw from. Now, let’s zoom in on the main tool appraisers use to apply this approach: the Sales Comparison Grid in the appraisal report.
Inside the Sales Comparison Grid (1004UAD Form)
If you’ve ever looked at a full appraisal report (for example, the standard Uniform Residential Appraisal Report, or URAR, often called the 1004 form under UAD guidelines), you’ve seen the Sales Comparison grid. It looks like a big table, typically on page 2 of the report, with the subject property’s information in one column and usually three (sometimes more) comparable sales side by side in other columns. This grid is where the appraiser itemizes the key features of the subject and each comp, shows any differences, and documents the adjustments made for those differences. It’s essentially a side-by-side comparison that quantifies how each comp is similar or different from the subject.
The sales comparison grid is divided into rows that represent various elements of comparison – things that can affect value – and columns for the subject and each comparable sale. At the top of the grid, you’ll see identifying info and sale details, and below that, line by line, the property features. Let’s break down each part of the grid and what it represents:
Property and Sale Details: The first rows of the grid list basic information for each property. This includes the address or identifier of each comp, its proximity to the subject (how far away it is, e.g. “0.25 miles NW”), and the sale price of each comparable. Often the sale date is included here or right below (sometimes as part of a “Date of Sale/Time” adjustment line). You might also see an entry for “Price/Gross Living Area”, which is simply the price per square foot (sale price divided by the living area) as a quick metric. Data Source and Verification lines show where the appraiser got the info (such as MLS, public records) and that it was verified. These details set the stage, letting the reader know when and for how much each comp sold.
Financing & Concessions: Appraisers will note if a comparable sale had any unusual financing or seller concessions. For example, if the seller paid some of the buyer’s closing costs or included personal property in the sale, it might inflate the sale price. The grid has a line for “Sales or Financing Concessions”. If a comparable sold for $300,000 but the seller paid $5,000 of the buyer’s closing costs, the appraiser might adjust that comp’s price down to reflect a more normal, cash-equivalent price. (In the grid you might see something like “Concessions: $5,000” and an adjustment of “-5,000” under that comp.) This ensures we’re comparing true market value prices. According to Fannie Mae guidance, comps with financing concessions must be adjusted to reflect their impact on price – the appraiser will only make an adjustment if the concession actually affected the sale price in the market.
Market Conditions (Time Adjustment): The real estate market can change over time, so a sale from 12 months ago might need a time adjustment compared to current market conditions. The grid often has a “Date of Sale/Time” entry. If the market has gone up 5% in the last year and a comp sold a year ago, the appraiser might adjust that comp’s price upward by 5% to reflect what it would likely sell for in today’s market (and vice versa if the market is declining). This is often called a market conditions adjustment. For example, an appraiser might note “s05/21; c07/21” (sold May 2021; contract July 2021) and then a “+5%” adjustment for time. The idea is to compare all sales as if they occurred on the same date (the effective date of appraisal), accounting for any overall market appreciation or depreciation.
Location: Location is a huge factor in value. The grid will have a line indicating the neighborhood or location quality of each property. Often it’s a coded rating or description (e.g. “N;Res” meaning neutral residential location, or it might describe view like “BsyRd” for busy road, etc., under UAD coding). If a comp is in a significantly different location or neighborhood quality than the subject – say the subject is in a quiet cul-de-sac and a comp backs to a busy highway – the appraiser may adjust for that. A better location (more desirable, like a quieter street or better school district) would typically cause that comp’s price to be adjusted downward (because the comp had an advantage over the subject), whereas an inferior location would get an upward adjustment (the comp is less desirable, so we boost its price to match the subject’s scenario). In essence, location adjustments reflect differences in desirability of surroundings, neighborhood, or site influence.
Property Rights: If applicable, the form notes whether the sale was Fee Simple or Leasehold interest. Most homes are fee simple (you own the land), but if the subject is, say, on leased land, comps might need adjustment if they differ in property rights. In typical owner-occupied homes this usually isn’t an issue (all are fee simple), so often no adjustment is needed. It’s just one of the elements appraisers check to ensure equal footing.
Site (Lot Size): The site line shows the lot size of each property (e.g. “7,500 sf” or “1.2 ac” for acres). Lot size can affect value, especially if there’s a big difference. If the subject sits on half an acre and a comparable is on a tiny 5,000 sf lot (about 0.11 ac), the appraiser might adjust the comp upward for its smaller lot (because a buyer would likely pay more for the subject’s larger lot). Conversely, if a comp has a much larger lot or perhaps additional land, the appraiser might adjust that comp downward (since its large site gave it a value boost in its sale price). Lot or site adjustments are often based on land sales or extractions, but for simplicity, just know bigger usable land can mean more value, depending on what the market reaction is in that area.
View: The grid will note if a property has a particular view – for instance, “Residential” (normal neighborhood view), “Mountain” view, “Golf Course” view, etc. A superior view (like a lakefront or panoramic view) can command a premium, so if the subject has a great view and a comp doesn’t, the comp might get an upward adjustment (to account for lacking that view). If the comp has the superior view and the subject doesn’t, the comp’s price would be adjusted downward. The principle is always to adjust the comp to the subject. So, for any feature: if the comparable is inferior to the subject in that feature, we add value to the comp to make it equal; if the comparable is superior, we subtract value from the comp . For example, if Comp A has a sweeping ocean view and the subject doesn’t, the appraiser might subtract a hefty amount from Comp A’s sale price (because if Comp A didn’t have that view, it would have sold for that much less).
Design (Style) and Quality: These lines describe the general design/style of the home (e.g. “DT1; Traditional” might mean a detached one-story ranch, or “2-Story Colonial,” etc.) and the quality of construction (often rated with terms or quality codes like Q3, Q4 in UAD, where Q1 is highest quality, Q6 lowest). If the subject is a high-quality custom home and a comp is a basic builder-grade home, the comp would likely get an upward adjustment (since it’s inferior in quality). Style differences are usually handled by selecting comps with similar overall style/utility (you wouldn’t compare a high-rise loft to a suburban ranch house), but sometimes an adjustment might be warranted if, say, the subject is a Victorian and comp is a simple ranch and the market shows a price difference for that. Generally, appraisers try to compare “apples to apples” with style and quality, minimizing the need for large adjustments here.
Age and Condition: The grid may list the actual age of the property (or effective age, if an older home has been renovated like new). More importantly, it lists the condition rating or description (like C3, C4 in UAD codes, where C1 is new, C4 might mean some minor wear, etc., or descriptions like “Average,” “Good,” “Fair”). If the subject is in better condition than a comp (e.g., recently renovated kitchen, new roof, etc.), the comp’s sale price would be adjusted up (because the comp in its inferior condition would have sold for less – so to make it equal to the subject, we add value to it). If a comp is in significantly better condition (maybe a top-to-bottom remodel) than the subject, the appraiser will subtract value from that comp’s price. Condition adjustments ensure we’re comparing as if all properties were in the same condition. Similarly, if there’s a big age difference (especially effective age), an adjustment might be applied if the market values newer homes more. The key is what the market’s reaction is to those age/condition differences – for instance, buyers might pay, say, $15,000 more for a house with a new roof and updated interiors, so an older comp lacking updates could get a +$15,000 adjustment.
Room Count and Gross Living Area (GLA): These are crucial. The grid will typically show the room count (total rooms, bedrooms, bathrooms) and the Gross Living Area for each property. For example, it might say “Total Rooms: 7; Bedrooms: 3; Baths: 2.0” and “GLA: 1,950 sq.ft.” for the subject, and then list the same for each comp. Differences here almost always require adjustment because the size of the home and its number of beds/baths directly affect value. Living area (square footage) is often adjusted at some rate per square foot based on market data. If the subject is 2,000 sq.ft. and a comp is 1,800 sq.ft., the comp would likely get an upward adjustment for being smaller. Suppose the appraiser determined from market analysis that the local buyers value living area at about $50 per square foot – then that comp would get +$10,000 (200 sq.ft. * $50) added to its price to account for its smaller size. On the flip side, if a comp is larger than the subject, the appraiser subtracts value. Bedrooms and bathrooms count differences can also warrant adjustments, although often these are somewhat rolled into the overall GLA value (since more GLA often means more rooms). But if, say, the subject has 4 bedrooms and a comp has only 3, and the market shows 4-bedroom homes sell for $X more than 3-bedroom homes even controlling for size, the appraiser might adjust for that. The same goes for bathroom count (e.g., a half-bath difference might be a few thousand dollars adjustment if buyers pay more for that extra bathroom).
Basements, Attics, and Additional Finished Areas: Many appraisal grids have a line for Basement & Finished Rooms Below Grade (for houses with basements). This will note if each property has a basement, how big it is, and whether it’s finished. For example, “Basement: 800 sq.ft.; Finished: 400 sq.ft.; Rec room & bath.” If the subject has a finished basement and a comp has none (no basement or an unfinished one), that comp will likely get an upward adjustment to reflect the subject’s valuable extra space. Appraisers will often use either market extraction or cost figures to support this (e.g., if finished basement space is typically worth $20/sq.ft. in that market, a comp lacking a 400 sq.ft. finished basement might get +$8,000). If a comp has a feature the subject lacks (say the comp has a basement and the subject is on a slab), the comp’s price would be adjusted downward. The idea, again, is to equalize the properties. Other areas like finished attics, guest houses, or rooms below grade are handled similarly: adjust for significant differences in living space or utility.
Functional Utility: This line addresses the overall functional utility of the home – basically, does the layout and design function well for its intended use (is it typical/average, or are there functional issues?). Usually, the appraiser will note “Average” or similar if the home has no functional problems. If one property had a functional issue (like a weird layout, or perhaps no heating system, etc.), an adjustment could be warranted. In most straightforward cases with typical houses, you won’t see an adjustment here beyond noting if something is inferior or superior in functional terms.
Heating/Cooling and Energy Efficient Items: The grid may list the type of heating and cooling (e.g. “FWA/Central” meaning forced warm air furnace with central AC, vs maybe “None” if no AC, or a swamp cooler, etc.). If the subject has central air conditioning and a comparable doesn’t, and if the market in that area values AC (which it generally does in warm climates), the comp without AC might get an upward adjustment (to reflect that if it had AC it would have sold for more). Energy-efficient features (like solar panels, high-efficiency windows) could also warrant an adjustment if market participants pay more for them. Often, though, these items are minor enough that the effect is rolled into condition or quality unless it’s something big like a fully owned solar array with significant utility savings.
Garage/Carport: Parking is another important line. The grid will note how many garage spaces, carport spaces, etc., each property has (e.g. “2ga2dw” might mean 2-car garage, 2-car driveway; or it might simply say “Garage: 2 Car; Carport: 0”). If the subject has a 3-car garage and a comparable only has a 1-car garage, that comp will likely get a significant upward adjustment because buyers definitely pay for garage space, especially in certain markets. For example, an appraiser might find that each additional garage bay is worth, say, $5,000 to $10,000 in that market. So a comp with one less garage space might get +$5,000 adjustment. Conversely, if a comp has more parking (maybe it has a 3-car and subject has 2-car), the comp’s price would be adjusted downward. The adjustments reflect the market preference: all else being equal, people pay more for homes with more protected parking.
Porch/Patio, Deck, Fireplace, Pool, etc. (Amenities): Finally, the grid will have lines for various amenities. Often, multiple items might be lumped into one line or split into a few. For instance, it might list “Porch/Patio/Deck” and describe if each property has a porch, patio, or deck. It might list “Fireplace(s)” (e.g. subject has 1 fireplace, comp has 2, etc.), and “Pool” or other outdoor amenities. Each of these can affect value to some extent. If the subject has a swimming pool and a comp does not, the appraiser may adjust the comp upward (if the market indicates pools add, say, $20k of value in that area, then the comp without the pool gets +$20k). If the comp has a superior outdoor living space (say an elaborate covered patio kitchen and the subject just has a small slab patio), the comp might get a negative adjustment. These adjustments for amenities are often derived from paired sales or surveys of market participants. Not every little feature gets an adjustment – only those that have a material impact on market value. The grid’s purpose is to capture the big ticket differences that buyers and sellers factor into prices.
After all those feature-by-feature adjustments, at the bottom of each comp’s column, the appraiser tallies up the adjustments. They’ll calculate the Net Adjustment (the sum of positive and negative adjustments) and the Gross Adjustments (the total of all adjustments without regard to plus/minus). For example, a comp might have $10,000 of positive adjustments and -$5,000 of negative adjustments, resulting in a net adjustment of +$5,000 (and gross adjustments of $15,000). These figures are sometimes shown as percentages of the comp’s sale price. Lenders and appraisers look at these to gauge how comparable the sale was – ideally, adjustments are minimal (a low net and gross adjustment percentage), meaning the comp was very similar to begin with. There is no hard rule, but as a guideline, a comp with, say, 40% gross adjustments is much less similar (and thus less reliable) than one with only 5% gross adjustments. However, even if large adjustments are necessary, what matters is that they are market-supported – the appraiser’s job is to reflect the market’s reaction to differences . Every adjustment made should be backed by some market data or logical rationale (for instance, derived from what buyers typically pay extra for a feature). Fannie Mae explicitly notes that adjustments must be market-based (no arbitrary “rule-of-thumb” adjustments that contradict market evidence) .
Finally, applying the net adjustment to the comp’s sale price gives the Adjusted Sale Price for that comparable. This is effectively what that comp would have sold for if it were essentially the same as the subject property. These adjusted prices of the comps form the basis for the appraiser’s reconciliation and final value estimate.
How Are Adjustments Determined? (Paired Sales, Regression, and Market Data)
Understanding that appraisers make adjustments in the grid leads to an important question: How do they figure out the dollar amounts (or percentages) for those adjustments? For example, how do we know an extra bathroom is worth $5,000 and not $15,000? How do we support adjusting $50 per square foot for size difference, or $10,000 for a garage space? This is where the appraiser’s analytical tools and market research come into play, guided by the principle of substitution and the idea of market reaction.
Appraisers rely on market-derived data to quantify adjustments – meaning they look to what buyers and sellers have actually paid for differences in features. There are a few recognized techniques for deriving adjustments, including paired sales analysis and regression analysis, among others. Let’s break those down in approachable terms:
Paired Sales Analysis (Matched Pairs): This is a classic method. The appraiser finds two sales that are very similar in all major respects except for one feature. By “pairing” them and comparing their sale prices, the difference in price can be attributed to that one differing feature (assuming everything else is equal). For example, suppose we have two very similar houses on the same street that sold around the same time: House A has a two-car garage, and House B (otherwise nearly identical) has a three-car garage. If House B sold for, say, $10,000 more than House A, that suggests the market was willing to pay about $10,000 for that extra garage bay in that neighborhood – so a reasonable garage adjustment would be around $10k. Or consider a situation where one house has a pool and the otherwise similar house doesn’t. If the one with the pool sold for $20,000 more, that gives a clue that in that market a pool’s contributory value is around $20k. Paired data analysis can be done with two properties or even the same property if it sold twice (once with a feature, once without, like before and after adding something). It’s not always easy to find perfect pairs, but appraisers often use this technique on several sets of sales to triangulate a supportable adjustment. It’s a direct way to isolate a single feature’s value.
Regression Analysis: In markets with lots of sales data, appraisers may use statistical tools like regression (often a linear regression) to estimate the value impact of multiple factors at once. By analyzing a large dataset of home sales, a regression model can tease out, for example, how much each additional bedroom or each square foot contributes to sale price on average, holding other factors constant . For instance, a regression might indicate that, in a certain area, every extra 100 sq.ft. is associated with an increase of $5,000 in sale price, or that having a fireplace adds 2% to the value, etc. While regression is more complex and requires sufficient data, it’s a powerful way to derive adjustments that reflect the general market trend. Appraisers sometimes use regression analysis results as a benchmark or support for the adjustments they apply in the grid. This method allows consideration of multiple variables simultaneously (unlike simple paired sales) . For example, a regression might show the combined effect of bedrooms and bathrooms on price, or the diminishing returns of square footage at larger sizes.
Cost and Other Methods: If direct market evidence is hard to find, appraisers might consider the cost of an item as a secondary support. For instance, if adding a screened porch costs about $15,000, and there’s no clear sales evidence, the appraiser might reason that a buyer wouldn’t pay more for that porch than it costs to add one (again, principle of substitution). However, cost does not always equal value – maybe that porch only adds $10k in the eyes of buyers despite costing $15k to build (common with certain renovations). Another technique is looking at income (mostly for rental properties – not usually for owner-occupied homes – e.g., how much extra rent a feature commands and capitalizing that). Grouped data analysis is another approach, where sales are grouped by a feature (e.g., all homes with pools vs. those without) to see the average price difference, though one has to control for other factors.
No matter the method, the key is that adjustments should reflect the market’s reaction to differences. Appraisers are essentially asking, “How much more or less would a typical buyer pay for this difference in feature, all else being equal?” The principle of substitution underlies this: a buyer will pay X for a house with the feature, versus Y for a similar house without, and not a penny more than the cost/value they perceive in that feature because if it was overpriced they’d just go buy a different house or add the feature themselves.
Example – Quantifying an Adjustment: Imagine we want to support an adjustment for gross living area (size). We gather a few recent sales in the area:
Sale 1: 1,800 sq.ft. house sold for $360,000.
Sale 2: 2,000 sq.ft. house (very similar location/condition to Sale 1) sold for $380,000.
These two are similar except for 200 sq.ft. difference in size. The larger home sold for $20,000 more. That suggests about $100 per square foot for size in that range.
We’d corroborate this with other data, but if other pairs or a regression shows a similar magnitude (say $80-$100 per sq.ft.), the appraiser might choose an adjustment factor in that ballpark, perhaps $90/sq.ft. to be safe.
Then, in the grid, if our subject is 2,000 sq.ft. and a comp is 1,800 sq.ft., we’d apply +$18,000 (200 * $90) to that comp. If another comp is 2,100 sq.ft., we might apply -$9,000 (100 * $90) because that comp is larger.
Example – Garage Adjustment via Paired Sales: Suppose we find two comps on the same street:
Comp A: No garage, sold for $250,000.
Comp B: Identical model house but with a 2-car garage, sold for $265,000.
The one with the garage sold for $15k more, suggesting a 2-car garage contributes about $15k in value in that market. Thus one garage space might be roughly $7,500 (though typically a 2-car garage is considered a whole unit of utility). If our subject has a 2-car garage and we’re looking at a comp with no garage, we might adjust that comp up by $15k. If a comp had a 3-car garage (perhaps worth even more, say $20k more than a 2-car in the market), and our subject has only 2, we’d adjust that comp down accordingly (the comp’s price gets a -$20k adjustment for having superior garage space).
Of course, real-life analysis is more complex (we have to ensure the sales truly are comparable and that the differences in price are really due to that one feature), but this gives a flavor of how appraisers pin down adjustment numbers using the matched pairs concept. If perfect comps don’t exist, appraisers use their judgment and as much data as they can – including surveys of buyer preferences, consulting cost figures, and using their experience. Modern tools like software and databases help with crunching the numbers (even applying automated regression), but appraisers must ensure the data is relevant and local, as values can vary neighborhood to neighborhood.
One important point to remember: Adjustments are always made to the comparables, not to the subject property. The subject serves as the benchmark – we imagine the subject in the center, and we’re tweaking each comp’s sale price as if dragging it up or down to match the subject. We never alter the subject’s characteristics. If the subject has a feature and a comp lacks it, we add to the comp; if the comp has a feature the subject lacks, we subtract from the comp . By the end, each comp’s adjusted value is an estimate of what that comp would have sold for if it were the same as the subject. This rule ensures consistency: all adjusted prices are on the subject’s level playing field.
Example: A Mini Sales Comparison Grid in Action
To tie this all together, let’s walk through a simple example of a mini sales comparison grid and adjustments. This will illustrate how an appraiser might adjust for a couple of key differences between a subject property and a comparable sale.
Subject Property (Our subject):
123 Maple Street
1,900 sq.ft. of living area, 3 bedrooms, 2 bathrooms
2-car attached garage
Good condition, standard lot in a typical neighborhood
Comparable Sale (Comp 1):
456 Oak Street, sold recently for $300,000
1,750 sq.ft. of living area, 3 bedrooms, 2 bathrooms
1-car garage
Good condition, similar neighborhood (only a few blocks away)
Now, Comp 1 is pretty similar: same bedrooms/baths and neighborhood, just a bit smaller and with a smaller garage. We need to adjust Comp 1’s sale price of $300,000 to account for those differences:
Size Difference: Comp 1 is 1,750 sq.ft. vs the subject’s 1,900 sq.ft. It’s 150 sq.ft. smaller. If our analysis of the market indicates that living area is worth about $100 per sq.ft. in this price range (just an easy number for this example), then we estimate a buyer would pay $15,000 more for a home with an extra 150 sq.ft. Therefore, we add $15,000 to Comp 1’s price to account for its smaller size. (In the grid, under “GLA” we’d put +$15,000 for Comp 1.)
Garage Difference: Comp 1 has a 1-car garage, whereas the subject has a 2-car garage. Let’s say our market data suggests a one-car garage difference is worth around $5,000 (buyers pay about $5k more for a 2-car vs a 1-car). So we add $5,000 to Comp 1’s price to adjust for that inferior garage count. (Under “Garage” in the grid, we’d note +$5,000 for Comp 1.)
Comp 1 didn’t have any other significant differences – condition, lot, etc., we’re saying are about the same. So the only adjustments were for size and garage.
Now we calculate Comp 1’s Adjusted Sale Price: Starting from its actual sale price $300,000, we add $15,000 and $5,000.
$300,000 + $15,000 + $5,000 = $320,000.
This $320,000 is the value of Comp 1 as if it had 1,900 sq.ft. and a 2-car garage just like our subject. In other words, had Comp 1 been exactly like the subject, it might have sold for roughly $320K in that market.
If we had more comps, we would do similar adjustments for each. Say Comp 2 and Comp 3 are also analyzed and end up with adjusted values of $315,000 and $325,000. We’d then have three adjusted sale prices in a range (perhaps $315K – $325K). Our subject’s value would logically be somewhere in that range, and the appraiser would reconcile those indications to a final opinion (maybe concluding around $320,000 if that seems most supported).
This little example shows the mechanics: always adjusting the comp’s price, and using market-based adjustment amounts for each item. Notice we didn’t adjust the subject at all; we just applied pluses or minuses to the comparable’s sale price. Also note that an appraiser wouldn’t just invent $100/sq.ft. or $5,000 for a garage – those numbers come from analyzing actual market data (as discussed in the previous section). In an actual report, the appraiser would likely comment on how these adjustments were derived (for example, “Based on paired sales analysis, a difference of one garage space is supported at $5,000 in this market.”).
Reconciling to a Final Value: The Appraiser’s Expert Judgment
After adjusting all the comparable sales, an appraiser doesn’t simply take an average of the adjusted prices. Instead, they move to a crucial step called reconciliation. This is where the appraiser weighs the evidence and comes to a final value conclusion for the subject. It’s a blend of analytical result and professional judgment – often described as the “art” of appraisal complementing the “science” of the grid adjustments.
In the reconciliation section of the appraisal (just after the sales comparison grid), the appraiser will list the adjusted values of each comparable and then discuss which comps were given more weight and why. The adjusted prices provide a range of value, and ideally they’re relatively close to each other (indicating good comparables). For example, if our comps adjusted to $315K, $320K, and $325K, the range is tight. If one comp is an outlier (far off from the others), the appraiser might deem it less reliable (maybe it needed huge adjustments or had some aspect that the others didn’t). On the other hand, if two comps cluster around $320K and one is at $350K adjusted, the appraiser might suspect the $350K one is from a slightly different sub-market or maybe the buyer overpaid, etc., making it less representative.
During reconciliation, the appraiser considers the quality of each comparable – factors such as:
Similarity: Which comp is most like the subject overall? Often the one that required the fewest and smallest adjustments is considered the best indicator. It needed less “fixing” to make it like the subject.
Data reliability: Was the comp a normal arm’s-length sale? Any peculiar circumstances? If a comp was a foreclosure or had non-market motivations, the appraiser might downplay it.
Timeliness and proximity: A comp that is more recent or closer to the subject’s location might get a bit more weight than an older or farther sale, assuming all else equal.
Number of comps: If many comps all point to a tight range, confidence in that value is higher. If data is sparse, the appraiser must lean more on judgment.
The appraiser then synthesizes all that into a final value. They might literally choose one comp’s adjusted value as most representative, or they might mentally weight a couple of them and come in between. For instance, if Comp 1 and 2 were very similar to the subject and adjusted to $320K and $315K, and Comp 3 was slightly less similar and adjusted to $330K, the appraiser might give more weight to 1 and 2 and conclude “$320,000” for the subject. They will typically note something like “Most weight was given to Comparable 2 as it required the least adjustment and is located within the subject’s subdivision, indicating a value for the subject at approximately $320,000. The other comparables support this conclusion as they bracket the subject’s characteristics and fall in a tight adjusted range.” This narrative helps the reader understand the reasoning.
It’s important to highlight that reconciliation is not a formula – it’s an expert judgment process. Two appraisers given the same set of comps might reconcile slightly differently, but all should be in the same general ballpark if they’re following the data. The principle of substitution still guides this step: the final value should be in line with what the market data (the substitutes) indicate. If the appraiser has done their job, the final opinion of value will not exceed the highest adjusted comp nor be below the lowest (since those represent the range of what similar properties sold for). In practice, appraisal reports will often state the final value and perhaps mention it’s within the range of adjusted comp values or even exactly equal to one of them.
This is also where the appraiser’s expertise and experience shines. They must exercise judgment and defend their conclusion. If one comp stands out as superior data, they’ll say so. If they averaged, they might implicitly do so but they usually will justify not going to the extreme high or low. For example, maybe the highest adjusted comp was a brand new renovation, whereas the subject is only average updated, so even if it adjusted similarly, the appraiser might choose a value a tad lower, sensing that slight qualitative difference. Such decisions come from understanding the market beyond just the grid numbers. This is why appraisal is often described as both analytical and interpretative.
Appraisers also ensure their final value makes sense in context of all approaches (in some reports, they may also have a cost approach or income approach if applicable, though for most single-family owner-occupied homes, the sales comparison is the primary approach). In a desktop or hybrid appraisal scenario, the reconciliation carries the same weight – the appraiser might not have seen the property in person, but they will carefully consider the data’s reliability. Often, desktop/hybrid appraisals lean even more on having multiple data points lining up, because the appraiser wants to be confident without an interior inspection. They might be a bit more conservative or double-check assumptions about condition and features through the data they have.
Ultimately, the reconciliation concludes with the appraiser’s final opinion of market value for the subject property, as of the effective date (often the date of inspection or the date of the desktop analysis). This value is what gets reported to the lender or client as the appraised value. It’s backed by the entire analysis – notably the sales comparison grid we just dissected.
Final Thoughts
The Sales Comparison Approach – especially as laid out in the sales comparison grid of the appraisal report – is a powerful method for pinning down a home’s value. By breaking down the components of value and comparing apples to apples, appraisers translate market evidence into a supported opinion of value. For homeowners, agents, or lenders reading an appraisal, understanding this grid and its adjustments can greatly clarify why the appraiser arrived at that final number. Rather than a black box, it becomes evident that the value is grounded in actual comparable sales and thoughtful adjustments for differences.
We’ve seen how each part of the grid represents an important factor (from location to amenities) and how appraisers adjust comparables – never the subject – to reflect those factors. We’ve also seen that deriving those adjustments is all about gauging the market’s reaction, using techniques like paired sales analysis or regression data, all rooted in the principle of substitution (no one will pay more for something than a similar substitute). A simple example illustrated how a few adjustments can turn a comp’s $300K sale into a $320K indicator for the subject once differences in size and garage are accounted for. And finally, we discussed the reconciliation process, where an appraiser’s training and judgment are essential to interpret the adjusted sale prices and settle on a final value.
In the context of Desktop and Hybrid appraisals, the same principles apply: even if the process of data collection differs (with technology and third-party inspectors), the analysis in the sales comparison grid is unchanged. The appraiser must still select good comps, make sound adjustments, and reconcile to a value – all with professionalism and an eye on market evidence. These newer appraisal formats aim to be more efficient, but they rely even more on the quality of data and the skill of the appraiser in analysis, since there’s less sensory information from an inspection.
An appraisal, at its best, is an independent, objective estimate of value. By running the numbers in a structured way, appraisers provide a critical piece of information that lenders, buyers, and sellers depend on. Hopefully, this detailed walkthrough of “how appraisers pin down value” gives you a clearer picture of the process. The next time you see an appraisal report, you’ll know exactly what that grid of numbers is doing: it’s the appraiser systematically comparing your property to its market peers and applying expertise to ensure the value makes sense. It’s truly a mix of market data analysis and expert judgment – a balance of science and art that lies at the heart of property valuation.
