What is a "comp" in real estate appraisal?

In real estate appraisal, a "comp" refers to a comparable property used as a benchmark for valuation purposes. Appraisers analyze comps to determine the market value of a subject property by evaluating similar properties that have recently sold in the same area. This process allows appraisers to account for differences in features, such as size, condition, and location, and provides a basis for establishing a fair market price.

Using comps is essential for accurate appraisals because they reflect the current market conditions and buyer preferences. By comparing the subject property to these similar properties, the appraiser can make informed adjustments that reflect the differences and arrive at a reasonable estimate of value. This methodology is a cornerstone of real estate appraisal and ensures that the appraised value is supported by recent market transactions.

The other options do not accurately capture the definition of a "comp." Properties used solely for tax purposes or as assessments of equity do not fulfill the role of comparables in valuation. Moreover, the term does not refer specifically to undervalued properties, but rather to properties that serve as a basis for comparison in determining the value of another property.