Hierarchy of Comparables: Judgment, Context, and the Real Value of Data

The question of which sources to use for comparables in property valuations has resurfaced in Italy, once again sparking debate. As is often the case, this discussion has been accompanied by sweeping claims—either justifying transactions or discrediting asking prices.

Too frequently, references to international valuation standards (IVS and RICS) are made selectively, cherry-picked to support a particular stance. But these standards deserve a more careful and unbiased reading. When approached with an open mind, they offer valuable guidance—especially on the appropriate use of comparables.

What the Standards Really Say

Maurizio Negri, our Network Director and a member of the RICS Italy board, highlights the importance of the RICS guidance note Comparable Evidence in Real Estate Valuation. Despite being published in 2019, it remains highly relevant, as it lays out fundamental principles that apply regardless of market conditions.

One key takeaway from the standard is often overlooked: market evidence should come from multiple sources, each with its own merits and limitations. For example:

• Transactions offer definitive price data, but often lack clarity on property specifics.
• Asking prices reflect seller expectations, which may be optimistic, but tend to include rich detail on the property.
• Databases provide average quotations, which can lack transparency but help define general pricing levels.

Furthermore, the reliability of a transaction price can vary dramatically depending on its source—whether it’s from a notarial deed, a news report, or a verbal account from an agent. Likewise, an asking price from a regulated entity (like an SGR) carries a different weight than one posted by a private seller online.

Building a Hierarchy of Comparables

These nuances underscore a central principle in the RICS approach: the hierarchy of comparables. After gathering market evidence, the valuer must weigh each data point based on factors such as:

• Similarity to the subject property
• Source reliability
• Completeness of the information
• Geographic and time proximity
• Contextual relevance

This isn’t about picking one source over another. It’s about applying professional judgment to determine the weight of each comparable, case by case.

More than a Method—A Discipline

Valuation is not a tug-of-war between transactions and asking prices. It is a professional process that relies on the informed judgment of the valuer. Both the IVS and the 2025 RICS Red Book underscore this: no credible valuation can be done without human expertise.

In Conclusion: Human Judgment at the Core

Technology—AI and machine learning—can support valuations by speeding up calculations and sorting through vast data. But they cannot replace the human ability to interpret context or recognize the subtle factors that influence real estate value. These are the foundations of a discipline that is part art, part science—and wholly dependent on professional judgment.

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