How a fair-value range is built from comparable sales

Every buyer eventually types the address into a portal and gets a number. Sometimes two numbers, from two portals, tens of thousands apart. The reason is not that one of them is wrong. It is that a single figure was never the right shape for the answer.

Why a range, not a number

A property has not sold yet. Until it does, the only facts are the prices other people paid for similar properties, and no two properties are the same. Each comparable sale carries its own differences in size, condition, position and timing, so each one supports a slightly different figure. Put the credible ones together and what they support is a band: the fair-value range. Anything narrower than the evidence is false precision. Anything presented as one number is somebody's opinion wearing a decimal point.

A range is also more useful. The asking price either sits inside it, under it, or above it, and each of those is a different situation to walk into.

Choosing comparable sales: likeness first, recency second

The standard used in every Property Decision Report is simple to state and slow to do.

• Same type and tenure. A house against houses, a unit against units, a strata title against strata titles.
• Similar size. Land for houses, internal area for units, within a sensible band of the property in question.
• Similar condition. Original, updated or renovated; a comparable that needed a full renovation is not evidence for a property that has had one.
• As close as the evidence allows. Same street or pocket first, then the suburb, then a neighbouring suburb with the same character.
• As recent as the evidence allows. Months, not years, where the market gives you the choice.

The regulator in Victoria defines a comparable sale along the same lines for the Statement of Information: the three sales an agent lists are meant to be the most comparable, not the most convenient. Anywhere in Australia, the test of a comparable is the same: could a buyer who wanted this property have reasonably bought that one instead?

Weighing them

Once the pool is chosen, each sale is read against the property, not just averaged. A sale on a larger block pulls up; a sale with a renovated kitchen against an original one pulls down; a sale from a hotter month than this one is discounted. The range is the band those adjusted figures cluster in, with the outliers explained rather than deleted.

Two rules keep this honest:

1. When the pool is thin, the range widens. Some suburbs and some property types simply do not produce enough recent, like-for-like sales. The right response is a wider band and a plain statement that the evidence is thin, not a confident-looking number built on two sales and a hunch.
2. Automated estimates are an input, never the answer. Portal and lender estimates are models that lean on the property's own last sale and suburb trends. They can be shown beside the recorded sales as one more signal. They cannot replace them, and they are never the basis of a range on their own.

Where the asking price sits

With a range in hand, the ad's number finally means something.

• Supported: the asking price or guide sits inside the range. The campaign is priced to the evidence, and the negotiation is about position within the band.
• Under: the guide sits below the range. Common in auction campaigns and in states that do not regulate guides; the guide is there to fill the room, and bidding is likely to land inside the range regardless.
• Over: the guide sits above the range. The vendor's expectation is ahead of the recorded sales, and time on market, a moved guide or motivated language are the things to watch.

From a range to three numbers

The range is evidence. The three numbers are a plan, and they come from the range plus the campaign.

• The opening figure sits at or just under the bottom of the range, framed by the comparable sales rather than as a lowball.
• The target is where the evidence and the campaign suggest the property realistically settles, usually mid-range, adjusted for how long it has been listed and what the vendor's position looks like.
• The walk-away number is the top of what the evidence supports for you: the price above which the purchase stops making sense on the recorded sales, however the room feels on the day. It is set before negotiating, in writing, precisely so that it cannot be moved by the negotiation.

Doing it yourself

Anyone can build a rough range with an afternoon and the recorded sales: pull the recent sales of like properties nearby, throw out the ones that are not really comparable, adjust for the obvious differences, and see where the rest cluster. The hard parts are getting the sale records rather than the listing prices, telling a renovated comparable from an original one without seeing inside, and resisting the pull of the guide once you have read it. A Property Decision Report does that work for one property and shows every comparable it used, so the working can be checked. The methodology page sets the standard it is held to.