I came across a really interesting piece from HousingWire that got me thinking about how we approach valuation in multifamily and condo buildings. The article makes a fundamental point that a lot of people in our business take for granted, but it's worth examining closely. When you're looking at comparable sales in a high-rise or vertical market, the unit right next door might actually be less comparable than something several floors up or down, even though it's physically closer. It sounds counterintuitive, but think about it: two units across the hall from each other with the same layout and square footage might appeal to completely different buyers if one has an ocean view and the other has a city view.
The real insight here is that we need to stop thinking about comparables purely through geography and start thinking about them through buyer behavior. According to the article, Fannie Mae's own definition puts this front and center. The question isn't "what sold closest to this property" but rather "what would my buyer consider if this property disappeared from the market tonight?" In a dense vertical market, that answer might be a unit in a different building altogether because of amenities, services, or the overall quality of the project itself.
What's also worth noting is that the industry has tons of property data available to us now, but we haven't done a good job organizing the relationships between properties. We know everything about individual units, but we haven't standardized how to think about which properties actually compete with each other. This matters especially when you're dealing with dozens or hundreds of towers in a relatively small area. Just because two buildings look like peers on a map doesn't mean buyers see them that way, and that affects value significantly.
The article also touches on an interesting tension with time and relevance. A sale from nine months ago that doesn't need adjustments might actually be more useful than a recent sale that requires multiple adjustments for changing market conditions. It's a reminder that newer doesn't always mean better when you're building your analysis. What really matters is finding sales that represent the actual competitive environment your property operates in.
What I am seeing locally is that this becomes especially relevant as we work through the Bay Area's diverse condo and multifamily markets, particularly in places like Fremont and the East Bay where you have different building types, amenities levels, and buyer demographics competing for attention. Rather than defaulting to the closest recent sale, we need to think about which properties would actually be on a buyer's list of alternatives, whether that's in the same building, the same neighborhood, or somewhere that addresses the same needs. That's what separates good analysis from lazy analysis in our business.
