A Comparable or
Comparative Market Analysis, (CMA), is a REALTOR'S®
opinion as to the value of a home in the market place. Ultimately the value
of a home will be determined by the buyer's offer and the seller's
acceptance; but the CMA, properly done and well analyzed, will give a seller
or purchaser a good idea of how much other buyers will likely spend for a
similar property. The agent is able to determine this value by looking at
prices buyers have recently paid for homes similar to yours in similar neighborhoods.Keep in mind that the preparation of a good CMA is not a science or an exercise in comparative mathematics. It's an art based on thorough knowledge of the dynamics of property sales in a specific area. The agent is required to make judgments based on the data he collects. This is why on-line CMA's, although, perhaps reasonable as a starting point, may be over or under valued by as much as 20 - 30% or more. A REALTOR'S knowledge of the market place and expertise in a local area cannot yet be duplicated by a computer.
Also understand that, for the same reasons mentioned above, the agent’s experience in the business and familiarity with the local area can affect the accuracy of the CMA. However, a CMA prepared by an experienced agent with good knowledge of the local market is usually right in line with the ultimate appraised value.
The data that the agent should collect will include information about:
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Solds ―
properties that have sold and closed (ownership has
officially transferred). These sales should be arm's length,
recent transactions that have closed within the last 6 months to no more
than a year. This collection of properties will be the most reliable data
for determining the probable sale price of a similar property in the
current market. |
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Active listings – properties currently for sale. For sellers
these will be your competition. Selecting a list price that is more
attractive to a buyer than the competition is more than half the battle in
the marketing of your home. If possible, visit open houses for some of
these listings to see how your home compares. However, beware "for sale by
owners", whose price may more whimsy than realistic. |
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Pending sales – listings that have sold but not yet closed. Be
careful here as well. Since the final sale price will not yet be known,
don't always believe the wild speculation of friends and neighbors. The
actual sale price may be quite a bit lower. Trust your REALTOR. |
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Expired listings – properties that did not sell during the listing period. A study of these homes may often be as revealing as a study of Solds. Knowing why a property did not sell can be invaluable. If these listings were priced above comparable homes that have sold, they pinpoint pricing that buyers will shun in the marketplace. |
Many factors go into determining which properties can be considered comparables:
- geographic area lot size
- assessed value
- features and of the parcel, including view, terrain, access, and negative external influences
- size of the parcel
- characteristics of previous sales of the property
- type and use of improvements (structures)
- square footage of the improvements
- features of the improvements, including quality and condition
- amenities
- age
The best comparable properties are those that match the subject in every aspect, however, since each piece of real estate is unique, several comparables are usually required to determine an accurate value of a property. Your REALTOR will make corrections (adjustments) to each comparable, adding or subtracting value for missing amenities, property condition, and improvements. This is the type of subjective analysis that only a REALTOR can do.
In the end he or she will give you a report which specifies a price range, upper and lower, within which your home should sell. He or she should also include a discussion of the current Absorption Rate (the rate at which properties are able to be sold or "absorbed" in an area within a given period of time), which will give you a picture of the current dynamics of the market place and allow you to estimate how quickly your home will sell.
A CMA can be a very useful tool no matter which side of the table you sit when your real estate transaction closes.
For a free professional home market analysis contact us or call one of our licensed REALTORs today.
