A Comparative Market Analysis, or 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 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. 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.
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.
Also understand that, for these same reasons, 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 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. |
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.
