What Is a Comparative Market Analysis?
A comparative market analysis (CMA) is an estimate of the value of a home based on recently sold similar properties in the immediate area. Real estate agents and brokers create CMA reports to help sellers bid on their homes and less likely to assist buyers to make competitive offers. Individuals can conduct their own comparative market analysis by searching for comparable properties (known as “comps”) on property listing sites such as zillow.com.
How To Do a CMA?
Comparative Market Analysis (CMA) is a home value estimate that helps sellers determine their bid prices and helps buyers submit competitive bids.
The analysis takes into account location, age, size, design, style, condition, and other factors related to the subject of ownership and comparisons.
If you are a buyer or seller interested in a CMA for a specific property, ask a local agent or real estate broker to help you, or do your own research by comparing houses online
- .He will find 6 comps in the are 3 months old with a range 1 mile
- 3 of the comps will be sold properties
- 3 of the comps will be pending/contingent or listed properties
- he will adjust any differences for each property to come up with an average sell price for all 7 properties (6 comps and the client’s property), all need to be even
- by adjusting things like adding $15,000 for updated kitchen, $5,000 dfor an extra powder room or $10,000 for a and extra bedroom.
How To Understand CMA?
Comparative market analysis helps sellers select the best asking prices for their homes. The “best” price is one that is not so low that it leaves money on the table, and not so high that the house does not sell at all. For buyers, CMA can verify that a home is a good deal and help pinpoint a competitive deal that will be taken seriously – without going overboard.
The CMA compares the property in question to other homes that are similar in location, size and function. Ideally, CMA should use recently sold homes in the same estate as the property in question. Of course, it can be difficult to find homes sold in the last three to six months in your immediate area if you are in the cool real estate market or in the countryside. In such cases, a formal assessment may be a better option.
Note that while benchmarking the market is like an informal appraisal, real estate agents and brokers do not need an appraiser license to conduct a CMA when servicing buyers and sellers. Still, some states will hold real estate agents and brokers accountable if they don’t carry out CMAs properly. In this case, the state commission for real estate licensing may take disciplinary action against the agent or broker.
How To Read a CMA Report?
When an estate agent or real estate broker does a comparative market analysis, it produces a report that provides details. While there is no standardized CMA report, it will typically include:
Subject ownership address and three to five comparators
Description of each property, including facade, floor plan, and number of bedrooms and bathrooms
- The area of each property
- The selling price of each comps
- Adjustments in dollars for differences
- Adjusted selling price per square foot of each comp
- The fair value of the property in question
Many real estate agents and brokers use software to generate comprehensive (and professional looking) CMA reports. If you plan to create your own, use a spreadsheet to track your research or try an online house pricing tool from one of the real estate listing sites. Below: a sample report.
Sample Real Estate CMA - Comparative Market Analysis Report
CMA is much more than just comparing the prices of recently sold homes in the area. Here is a summary of the basic steps for creating an accurate CMA:
Evaluate the neighborhood.
To get the auction price right – or to make sure the home you’re interested in is a good deal – the CMA should consider the overall quality of the neighborhood. Where are the more attractive blocks? How close are the community amenities? How close are the social nuisances? What are the HOA rules? How are the schools? Are there any problems with curb appeal?
Gather details of the subject of property.
If an agent or real estate broker conducts a CMA, they will review the existing listing (if any) and make a personal visit to gather information about the home in question. They will look at home size (especially living space), age, style, construction, condition, layout, finishes, landscaping, and upgrades and updates.
Find three to five comparable homes in your area that have recently been sold and that are as close to the property as possible. Ideally, the compositions should be within a mile of the subject and in the same school district. Focus on homes that are similar in size, lot size, bedrooms, bathrooms, and construction type. Pay particular attention to when the comparable property was sold: the newer the better as property prices can fluctuate rapidly. If the house has a unique location – for example, overlooking a golf course or waterfront – the compositions should have the same location.
Adapt to the differences.
The next step is to accommodate the differences between the home in question and any comparable property. An experienced real estate agent or broker will be able to assign a value to each of the differences in dollars and adjust the value of each comp accordingly. This may seem counterintuitive, but if the composition has a function that is inferior to the main side of the item, a positive correction to the comp value is made and vice versa. For example, if the computer has an additional bedroom (the parent trait), it is reasonable to assume that the buyer has paid more to get the additional bedroom. In that case, you would deduct an amount from the comp to include the extra bedroom, thus allowing you to compare apples to apples. The target home value is never revised.
Specify the selling price per square foot after the adjustments.
After adjusting for the differences, divide each product’s adjusted price by its area to determine the selling price per square foot. Then add up the selling price per square foot of all products and divide by the number of products to get the average. Finally, multiply this average by the square feet of the property in question to find its current market value.
In general, the best compositions are the ones that most closely resemble the theme at home, the ones most recently sold, and the ones with the least amount of correction required. The final price may need to be adjusted slightly depending on the market. For example, if the market is hot or if the stocks are low, the price may be slightly higher. Conversely, if there are many similar homes on the market, the price may drop to make it competitive.