Understanding a CMA – Comparative Market Analysis

You received so many papers with your offer on your home, including the appraisal, survey, and title insurance documents.

When people go to buy or sell a home, understanding what it’s worth can be a bit overwhelming. That’s where a Comparative Market Analysis, or CMA, becomes your secret weapon. Beyond a buzzword in real estate: A CMA provides a straightforward way to figure out what a property is worth by comparing it to similar nearby homes.

As a prospective seller, you want to know what kind of price point will give you a competitive position; as a buyer, you’re looking for the information that will help you make your best offer. Knowing how CMAs are put together can save you time, money and frustration. This blog post explains everything you need to know about a Comparative Market Analysis and why you should use it to your advantage.

What’s a Comparative Market Analysis?

The comparative market analysis lets you as well as your real estate professional, compare the value of your property with that of recently sold homes and those that are currently on the market or are pending listing in your area that are similar to yours. Not to be confused with an official property appraisal completed by a professional appraiser, a CMA is an informal way of determining how much a home is worth. An efficient way for agents to weigh in on the value of a home, a CMA helps buyers and sellers make an informed decision.

Realtors normally examine certain attributes, comparison data, as well as marketing trends to prepare a price they consider a property is worth. This means sellers can price their homes competitively while buyers can avoid overpaying on a potential purchase.

Why Do You Need a CMA in Real Estate?

Matching a home to a potential buyer depends upon determining the price of the property that compares favorably with other properties in the area. The selling price of a home you are considering should always be calculated on the basis of a CMA. Can a CMA help both Buyers and Sellers? Yes! QStringListing price of your home, based on other homes for sale in the area, can be obtained by a CMA.

Accurate Pricing for Sellers

Pricing a home appropriately when it goes on the market could make the difference between a quick and easy sale and a listing that languishes for months or even years. If you set the price too high, then they are going to pass right over your home. Beyond that, if the price is too low, you stand to lose thousands of dollars. By doing this research, you maximize the amount that buyers are willing to pay, while minimizing any “leaving money on the table,” which is where you price yourself too low and walk away with less cash than you should.

Enabling Buyers to Submit Intelligently Priced Offers

The primary advantage for buyers is to have an idea of the property’s market value, so they are not flying blind with their offer based strictly on the seller’s asking price. A CMA, then, gives context when negotiating to make sure the price is in line with the home’s actual value.

Supporting Negotiations

With access to recent sales figures and the latest market conditions, having a CMA on hand can be a powerful tool in negotiation. Sellers can feel more confident that their price is backed by data, and buyers can lean on the data to support their counteroffers.

Minimizing Risks

A CMA protects you from underselling or paying too much for the property. Sellers do not overprice and buyers do not over pay for their purchase if they have the correct value of the home.

The Key Elements of a CMA

Preparing a Comparative Market Analysis (CMA) involves reviewing lots of minute details. The following are the key elements of a CMA:

Recently Sold Properties

Real estate agents begin with nearby homes that are similar in style and size and that have sold over the past three to six months. These “comps” are the gold standard for gauging what buyers are prepared to pay in your market.

What real estate agents will see:

• Sale Price: What was the sale price of the property?

• Location: Will it be in a similar part of town or area of the school district?

• Size: Approximately the same as the square footage and lot size.

• Features: The number of bedrooms, bathrooms, and special features, such as a pool or updated kitchen.

Active Listings

And where sold properties establish the precedent for the value of the market, the active listing is your competition. These are homes for sale right now that buyers will be looking at while they’re considering your home.

How this helps:

• Sellers can determine whether their home stands out — or gets masked by competition — based on their asking price.

• Shoppers can see what else is available at a similar price.

Expired or Withdrawn Listings

Have you ever wondered why some homes never sell? Expired or withdrawn listings tell you what doesn’t work. Those properties that sat on the market did so because they were overpriced or poorly marketed.

Why these matter:

• Sellers can take cues from where others went wrong, like setting the price too high.

• Buyers have a better sense of what the top end of the market is.

Pending Listings

Pending sales are under contract and not yet final. The sales shed light on current buyer demand and activity.

How these are useful:

• Here are what price ranges in your area are drawing offers.

• Sellers can use this information to adjust their list price.

Market Trends

A CMA reflects current market trends such as increasing demand or price fluctuation, and adjusts valuation to meet those trends. For example, in a seller’s market with limited inventory to choose from, prices might trend higher.

How to Perform a CMA (Comparative Market Analysis)

Real estate pros have the tools and knowledge to concoct precise CMAs, but that doesn’t mean you can’t get an idea of your home’s value on your own. Some agents follow six steps when preparing a CMA:

Step 1. Analyze the Subject Property

The first step in the process is reviewing the home. Take note of the number of bedrooms, spaciousness, age, conditions and improvements. A 1 car garage, on the other hand, is far different from a 2 car garage in perceived value.

Step 2. Gather Comparable Properties

Find three to five properties comparable to the subject that are as close to equivalent as possible. The more common the traits, the closer you are to that your analysis is correct.

Step 3. Adjust for Differences

Hardly any properties are a perfect fit. Price similar properties differently according to significant differences. For instance:

• If a comp has a pool but the subject property does not, subtract the value of the pool from the sale price.

• If the subject property has an updated kitchen but the comp does not, adjust for value added.

Step 4. Analyze Market Trends

Base Rates on Broader Market Conditions Consider adjusting your rate depending on what the broader market is doing — whether prices are generally rising or falling in your area.

Step 5. Create a Recommended Value Range

Instead of a single number, CMAs generally offer a range at which the property might sell, leaving some room for negotiation between buyers and sellers.

Step 6. Present the CMA

Once completed, the CMA ought to be illustrated in a simple, understandable manner. And for the most part, agents aren’t going to use visuals such as graphs, charts and pictures of comp properties to inject clarity.

Mistakes to Steer Clear of with CMAs

You can make some costly errors in a CMA and make a poor decision. Here’s what to watch out for:

• Trusting Online Tools alone: Automated tools (like Zillow’s Zestimate) can be useful but they cannot really be relied upon at all. A professional CMA is also much more accurate.

• Relying On Old Data: The Markets Change Quickly. Make sure to reference the latest sales numbers.

• Without Considering Location Variables: The area in which a property is situated, school system, and nearness to facilities make a difference.

How to Get a Professional CMA

While you can do a CMA yourself, having a professional real estate agent perform one makes it more accurate. Agents leverage their market know-how with tools and assets to give you a complete analysis fit for your property.

If you have an impending home sale or purchase, you can request a personalized CMA from a local agent. It will help you to make a confident decision to buy or sell a home.

Maximize The Potential Value Of Your Land

It’s important for you to know what a CMA is because it’s what helps you confidently maneuver throughout the real estate market. If you’re looking to buy or sell, or just want to know what your property is worth, a CMA has the information necessary to help you take the next steps in making a decision.

Want to take the next step? Get your personalized CMA by contacting a local real estate agent you can know. Every little thing counts when it comes to the value of your property. Seize the moment — and slide right in with confidence.

You can also read this: How to Develop a Data-Driven Marketing Strategy That Works