Good Comps: The Art, The Science, and the Occasional Psychic Reading

If you’ve ever tried to buy or sell a business, a house, or even a vintage Chevelle SS, you know there’s one phrase that can trigger heated debates, rolled eyes, and the occasional unprintable comment: “What are the comps?”

Ah yes, comps.

The magical word that’s supposed to mean “objective evidence of value”… except it’s often code for “whatever number makes my case sound better.”

Here’s the thing: Defining good comps is a work of art. Understanding them is a work of science. And sometimes, it’s also a little bit of detective work with a dash of stand-up comedy.

The Art of Defining Good Comps

Picking comps is like picking a playlist for a wedding. Sure, you could just play the Spotify “Top 40” and call it a day, but if you want the crowd to stay on the dance floor (or the buyer to stay in the negotiation), you’ve got to curate.

The “art” comes from knowing:

1. What’s Relevant vs. What’s Convenient
   That $2M beachfront bungalow in Malibu might be “similar” to your inland condo if you stretch your imagination, ignore geography, and maybe have heatstroke. Real comps require relevance in location, size, condition, and timing.

2. What’s Real vs. What’s a Unicorn
   That one-off, way-over-market sale? Tempting to include. But if it’s not repeatable in the real world, it’s an outlier. Treat it like your cousin’s story about catching a 200-pound fish—fun to hear, but it’s not going in the official record.

3. The Story Behind the Sale
   Was it a divorce fire sale? A corporate relocation? A late-night “fine, just sign it” deal? Context matters. Numbers without backstory are like wine without a label—you don’t know if it’s vintage or vinegar.

The Science of Understanding Comps

Once you’ve painted your masterpiece of relevant, reasonable comps, it’s time for the science part.

Here’s where you trade your artist’s beret for a lab coat:

1. Time-Adjust the Numbers
   Market conditions can change faster than gas prices on a holiday weekend. A comp from six months ago might need an adjustment up or down, depending on the market’s direction.

2. Quantify the Differences
   Bigger lot? Smaller building? Newly remodeled kitchen versus one that looks like it’s auditioning for a 1970s sitcom? Assign a realistic dollar value to these differences—not just a guess you pull from thin air.

3. Statistical Reality Check
   If one comp is way higher or lower than the others, don’t just shrug. Figure out why. Sometimes outliers reveal a hidden factor you missed… and sometimes they’re just noise that needs to be ignored.

Best Methods for Determining Comps

Whether you’re in real estate, M&A, or vintage car flipping, here’s the playbook:

• Use Multiple Sources: MLS, CoStar, BizBuySell, auction records, public filings—cross-reference like your credibility depends on it (because it does).

• Limit Your Radius: In real estate, that means neighborhood. In business sales, it means industry and market niche.

• Match the Timeline: Comps older than 6–12 months start to lose relevance unless the market is extremely stable (spoiler: it rarely is).

• Adjust Objectively: Use consistent, transparent adjustments for size, condition, or performance differences.

• Throw Out the Weird Ones: If a comp doesn’t make sense after a second look, it’s not helping you—it’s confusing you.

The Takeaway

Defining comps is an art because you have to know what to include and what to leave on the cutting room floor. Understanding comps is a science because you have to strip away bias, run the numbers, and let reality have the final say.

The danger? Treating comps like a buffet where you only take what you like. The goal? Building a case so airtight that even your toughest critic nods and says, “Yeah… that checks out.”

And if all else fails, you can always consult the ancient and mysterious “Comps Whisperer”—but you might just find they’ve been using the same playbook all along