Selecting Comparable Properties
Selecting the appropriate comparable properties for your BPO is one of the most important and often most difficult steps of completing the BPO. Without relevant comparable properties you are going to have trouble determining the value of the subject property. Most BPOs will require three sold comparable listings, which should be sold within the last six months (or more recently if possible) and three active comparable listings.
In an effort to obtain three sold comparables and three listed comparables you should look for properties most similar to the subject property in all characteristics. The same number of bedrooms, square footage, condition and characteristics across the street is the ideal comparable property. Understanding that you won’t find identical properties next door to the subject is fine but start with that as a baseline and slowly expand your criteria out to be more lax until you obtain the desired number of comparable properties.
The proximity of a comparable to your subject property is always an important factor. If the subject property is in a densely populated area you should be search- ing within a tighter radius. If the subject property is in a rural area you can expand your search radius more liberally.
You will adjust for the differences between the comparable properties and your subject property but the less variations you have the better the valuation will be. A perfect BPO would be one in which no adjustments would need to be made because all of the properties are identical to the subject property. This is unrealistic, but should assist you in selecting comparable properties that are as similar as possible to the subject.