Market Value - Comparable Market Analysis

Keep in mind that the preparation of a good CMA is not a science with formula into which the agent simply plug numbers. It's an art based on the thorough knowledge of the dynamics of property sales in a specific area. The agent is required to make judgments based on the MLS data he collects. On-line, computerized CMA's, although, perhaps reasonable as a starting point, usually have a margin of error of +/- 7.5 percent to start -  and at times have been shown to be over or under value by as much as 20 - 30% or more. You may be tempted to rely on the value of your property as set by these sites, but the truth is they have no way to analyze the quality of your improvements or the hundred other peculiarities that affect price in your locality.

A far more accurate estimate of value can be made by a competent real estate agent who lives and works in your local market. The key word here is 'competent', because the agent’s experience in the business and familiarity with the local area can also 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.

 Although there is no substitute for a  REALTOR'S knowledge of the market place and expertise in a local area, our new On-Line NEIGHBORHOOD VALUATION will give you an insight as to what your home may be worth. However, for the reasons cited above, we recommend a professional market analysis be made before you set out to market your home.

The Multiple Listing Service (MLS) data that the agent should collect will include information about:

• 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.
• 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 emotional than realistic.
• 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^®.
  
  An astute REALTOR^® can also use the up or down trend in the number of Pending Sales to predict the short term demand for housing which can directly affect the value of your home. The majority of Pending Home Sales turn into “sold” transactions within 30 to 60 days. This statistical relationship between Pending Sales and Closed Sales can be used to predict actual home sale activity.
• 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.
• Comparable list-price-to-sale-price ratios. Often overlooked by the inexperienced agent is an analysis of the list-price-to-sale-price ratio for the comparable homes. By evaluating whether comparable homes typically sold below, at or above asking price, the agent can more accurately determine where to price your home to sell in the least amount of time. and for the most money.

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.

See also:

• Use "Absorption Rate" To Help Sell Your Home More Quickly
• Broker's Price Opinion (BPO)