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What Is a Comparative Market Analysis?

comparative market analysis

A Comparative Market Analysis (CMA) is an in-depth report created by real estate professionals to aid in the pricing of a property. The report includes past sales and current listings of properties that are similar to the subject property. Realtors often create CMAs in preparation for listing presentations; the CMA will aid both the agent and the seller in their pricing of the property before it is taken to market.

Getting an accurate comparative market analysis before putting your home on the market is essential. It helps ensure that you don’t overprice or underprice your property – both scenarios can hurt your chances of getting maximum returns on your sale.

Getting a CMA gives you peace of mind knowing that you’re making informed decisions about listing your home and setting competitive asking prices to get top dollar for your sale.

But what is a CMA, and how can it benefit sellers? Keep reading as we take a deeper look into what a CMA involves and why it’s such an essential step for anyone looking to list their home.

What Is a Comparative Market Analysis?

A Comparative Market Analysis (CMA) is an analysis of a specific geographic area that compares the prices, trends, and conditions of recently sold properties with the ones currently listed for sale.

It involves analyzing data from multiple sources and determining the current market value of a property to establish its selling price. The CMA is used by real estate agents, lenders, appraisers, and home sellers to ensure they are making informed decisions based on reliable information.

The information obtained through a CMA can be used not only by real estate agents when assessing a list price but also by banks when deciding whether or not to provide financing for a given property. An accurate CMA will help lenders gauge risk by determining residual value before giving out loans or mortgages.

Appraisers also use this method when compiling reports for valuations required by tax authorities or insurance companies before closing a sale. Home sellers can make informed decisions about listing their homes at a competitive price point when armed with knowledge from a CMA regarding comparable residential listings in their area.

How Is a Comparative Market Analysis Done?

Creating a Comparative Market Analysis (CMA) involves an intricate process to gauge market value accurately.

The steps needed generally include research of recent sales, evaluation of features & amenities that may affect the sale price, and comparison with local economic trends.

It is essential for delivering precise figures when assessing real estate properties in any given area! Let’s have a look at how a comparative marketing analysis is done.

  1. Evaluation of the Neighborhood

Several factors must be considered when setting a price for real estate or determining whether you’re considering an attractive deal. These include the overall quality of the neighborhood and its features, such as amenities, public nuisances, HOA guidelines, and school accessibility. Additionally, don’t forget about curb appeal—it can make all the difference!

  1. Showcasing the Features of the Property

A licensed real estate agent or broker can provide a comprehensive CMA (comparative market analysis) of your property. During this process, they’ll assess the home’s size, age, style, and construction, along with any improvements made over time – such as landscaping upgrades and updates to interior finishes.

All basic features will also be considered, like the location within the local zip code area, specific amenities like swimming pools & garages, etc. Additionally, all information about surrounding areas is evaluated to achieve an accurate overall assessment when deciding on pricing strategy.

  1. Select Comparable Properties

Studying recently sold homes in the same school district and vicinity can give an accurate snapshot of how much a property is worth. Identify properties comparable to yours—matching their square footage, lot size, number of bedrooms/bathrooms, and type of construction —within up to one mile from your location for best accuracy.

Remember: recent home sales will offer more current pricing information than those sold further back in time!

What to Consider When Choosing Comparable Properties?

  1. Location: The location of the comparable properties should be similar to the subject property. Properties located in the same neighborhood or nearby area will provide a more accurate comparison.
  2. Size and Age: The size and age of the comparable properties should be similar to the subject property. Properties of a similar size and age will provide a more accurate comparison.
  3. Condition: The condition of the comparable properties should be similar to the subject property. Properties that are in similar situations will provide a more accurate comparison.
  4. Features and Amenities: The features and amenities of the comparable properties should be similar to the subject property. Properties that have similar characteristics and amenities will provide a more accurate comparison.
  5. Sales Price: The sales price of the comparable properties should be similar to the subject property. Properties that have comparable sales prices will provide a more accurate comparison.
  6. Timeframe: The timeframe in which the comparable properties were sold should be similar to the subject property. Properties sold within a similar timetable will provide a more accurate comparison.
  7. Market Trends: Consider market trends in the area when choosing comparable properties. The market conditions in the area will affect the value of the subject property and similar properties.
  8. Professional Opinion: A professional opinion from a real estate agent or appraiser can help select comparable properties. They will have knowledge of the area and the market conditions, which will help in selecting properties that will provide an accurate comparison.

4. Adjust for Differences Against Comparable Properties

To ensure a fair and accurate comparison between properties, it is necessary to adjust for any disparities. Expert real estate professionals have the knowledge to assign values to different features to make appropriate adjustments accordingly.

For instance, if a comparable property has an additional bedroom (a desirable feature), its price should be adjusted downwards since buyers usually pay more for these kinds of advantages.

On the other hand, inferior characteristics warrant higher value additions so each home can accurately be compared with another – leaving our target house unaffected by modifications made during this process.

  1. Determine the Average Price After Adjustments

To get an accurate estimation of a property’s price, adjust for any discrepancies between comps and calculate the sold price per square foot by dividing the adjusted prices.

Aggregate these figures to obtain the average sold price per square foot before multiplying it with your subject property – giving you a total estimated value!

What Does a Comparative Market Analysis Report Should Contain: The Cheat Sheet

  1. Introduction of Comparative Market Analysis Report
  • Purpose of the report
  • Date of the report
  • Location of the subject property
  1. Market Overview
  • Current market conditions
  • Historical market trends
  • Economic indicators (e.g., unemployment rate, GDP growth)
  1. Subject Property Information
  • Address and legal description
  • Property type (e.g., single-family home, townhouse, condo)
  • Bedrooms and bathrooms
  • Square footage
  • Age of the property
  • Condition of the property
  • Features and amenities
  • Current listing price
  1. Comparison Properties
  • List of similar properties in the same area
  • Property type, bedrooms, bathrooms, square footage, age, condition, features, and amenities
  • Sale price and date of sale
  • Days on market
  • Sale price to list price ratio
  1. Analysis
  • The average sale price of comparable properties
  • The median sale price of similar properties
  • Range of sale prices for similar properties
  • The current market value of the subject property is based on similar properties
  1. Conclusion
  • Summary of findings
  • Recommendations for pricing or marketing the subject property
  • Additional information or data may help determine the property’s value.

Is Comparative Market Analysis Accurate?

Comparative Market Analysis (CMA) is a tool used by real estate agents and appraisers to determine the value of a property. It involves comparing a subject property to similar properties recently sold in the same area.

While CMAs can provide a general idea of a property’s value, they are not always 100% accurate. Experience of the agent performing the CMA, as well as factors such as the property’s condition, location, and market trends can all affect the accuracy of a CMA. Additionally, the data used in a CMA may only sometimes be up-to-date or complete, which can also affect its accuracy. Also, real estate markets are constantly changing. CMAs are performed looking to the past for pricing guidance.

It’s important to note that a CMA is not an official, binding appraisal. The buyer’s lender will eventually require that the buyer pay for an independent appraisal, which may or may not agree with a Realtor’s CMA. The bank will base its lending decision and whether to provide financing to the buyer on the independent appraiser’s valuation of the home–not the Realtor’s CMA.

If you are selling a property, Realtors sometimes advise their clients to obtain an independent appraisal (which will NOT be binding on the eventual buyer’s lender), to help price the home and to help the seller strengthen the seller’s negotiating position.

What Is the Difference Between a Comparative Market Analysis and an Appraisal?

An appraisal and a Comparative Market Analysis (CMA) are used to determine a property’s value. Still, they are used for different purposes and have other methods of determining value.

An appraisal is a professional assessment of the value of a property, typically conducted by a licensed appraiser. Estimates are used for various purposes, including mortgage lending, property tax assessments, and legal disputes. Appraisals usually involve a detailed inspection of the property and a thorough analysis of comparable sales in the area. They also consider factors such as location, condition, and amenities of the property.

A CMA, on the other hand, is a report prepared by a real estate agent or broker to estimate a property’s value based on comparable sales in the area. Sellers often use CMAs to determine a listing price for their property and buyers to determine a fair offer price. CMAs are based on a more limited set of data, including recent sales of similar properties in the area, and do not include a physical inspection of the property.

In summary, an appraisal is a more detailed and formal assessment of a property’s value. At the same time, a CMA is a more informal estimate of a property’s value based on comparable sales in the area.

What are the Advantages of Getting a Comparative Market Analysis?

A Comparative Market Analysis, or CMA, is a valuable tool for buyers and sellers in the real estate market. There are several advantages to getting a CMA, including the following:

  1. Accurate Pricing: A CMA provides an accurate and detailed analysis of comparable properties in the area, which helps sellers price their property competitively and buyers understand the current market value of a property.
  2. Insight into Market Trends: A CMA also provides insight into market trends, such as how long properties are staying on the market, what types of properties are selling quickly, and what types of properties are in demand.
  3. Better Negotiating Power: With a CMA, buyers, and sellers can have a better understanding of the market, which can give them more leverage in negotiations.
  4. Increased Confidence: Knowing the current market conditions and comparable property prices can give buyers and sellers more confidence in their decisions.
  5. Professional Opinion: A CMA is typically conducted by a real estate professional, meaning buyers and sellers can receive a professional opinion on the market and their property.

A Comparative Market Analysis is crucial for buyers and sellers in today’s real estate market. It provides a comprehensive understanding of the market, leading to better decisions, improved negotiations, and, ultimately, a successful sale or purchase. Don’t miss out on it, and take advantage of it now!

The Bottom Line

A comparative market analysis (CMA) is a powerful tool that can provide valuable insights into the current state of a local real estate market.

By comparing the price, condition, and features of comparable properties, a CMA can help buyers and sellers determine a fair market value for a property and make informed decisions about buying or selling.

Whether you’re a first-time home buyer, a seasoned investor, or a real estate professional, a CMA can give you the edge you need to navigate the competitive world of real estate.

So, if you’re looking to buy, sell, or invest in real estate, consider getting a comparative market analysis and take advantage of its many benefits.

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Last modified: January 22, 2023