What is a Comparative Market Analysis
A Comparative Market Analysis (CMA) is an in-depth study that compares the price tags of similar properties on the market and recent property sales records. The goal of a CMA is to find an accurate range of what your home is worth. Your real estate agent will complete a CMA for you since it's the best way to price your home to sell and make certain you get top dollar.
Why Do a CMA?
There can be a difference between the amount your home is priced at and what it is really worth. You do not want to over price your property and hope for unrealistic offers, nor do you want to bargain price the home when buyers might try to negotiate further. A comprehensive CMA will show you what price range your home falls into, and it provides the statistics to back up that asking price.
How Much Does it Cost?
Your real estate agent will do a CMA report at no extra cost. This involves pulling data from the Multiple Listing Service (MLS) for homes currently for sale and for those that recently have sold in your area that are also the closest match to your property. In other words, you do not want to compare apples to oranges. The homes in the report should be similar in square footage, lot size, condition, and features. Though no home may be identical to your own, educated guesses regarding the value in the differences will be made and added or subtracted. For example, a home like yours but without a garage will get the value of a garage subtracted from its price in this analysis.
The Right Comparables are Important
Picking the wrong comparables creates the wrong price range. Your listing agent will share their comparables. Things looked at include:
- Type & style of home: Condos can not be compared to houses, and a one story ranch is hard to compare to a two story colonial.
- Neighborhood & school district: The CMA will show comparables in the same or similar neighborhood and school district as your home.
- Date of sale: The market changes daily, so more recent comparables are best. Usually your agent will not go back more than a few months in their search.
- Location, location, location: Views, waterfront access, and even the type of neighborhood a home is in all factor into the home's value.
- Square footage: The comparables should be within 15 percent of your home's square footage.
- Number of bedrooms and bathrooms: Comparing larger homes with 3, 4 and 5 beds is fine but below that it gets tricky. Homes with one and two bedrooms do not compare well with 3 to 5 bedroom properties.
- Age of home: A new home makes a good comparison for new home construction or other homes under five years old. However, its value is different than those on a list of old homes for sale. Keep in mind that with the age of the home usually comes age of the systems within the home, like the furnace. This may be a liability rather than an equal value.
- Condition of home: You cannot compare a fixer-upper to a well-maintained or a recently remodeled home.
- Lot size and usability: Lot size is significant only when the difference is big. For example, a home with an acre of land can't be compared to one with a small back yard.
CMA Basics to Remember
Some things about the property may not have the selling value that you might think it has. For example, properties with a pool might be nice for those buyers who want a pool but actually may work against you for buyers who don’t want the work or have small children. This is a feature that probably does not add the value of what it cost you to install.
Once you have the CMA in hand you can see how similar properties were priced, how long it took them to sell and what the final contracted price was. You can also see what your competition is with similar homes for sale. This is how your real estate agent will determine what offering price you should consider.
Remember, pricing correctly from the day your home hits the market is the smartest way to sell in a reasonable amount of time and at the right price.