A Comparative Market Analysis (CMA) provides a strategic estimate of a home’s price based on recently sold, similar properties in the immediate area. Real estate agents and brokers use CMAs to set competitive listing prices and help buyers make informed offers. Additionally, you can conduct your own CMA by researching comparable properties, often referred to as “comps,” on various real estate listing platforms.
Key Takeaways
- A comparative market analysis (CMA) is used to help sellers set listing prices and help buyers make competitive offers.
- Top factors in the analysis include location, size, style, condition, construction, and comparable features.
- CMAs can be conducted independently, but local real estate agents or brokers offer expertise and experienced insight.
Understanding Comparative Market Analysis
A CMA assists sellers in setting optimal listing prices and aids buyers in making competitive, realistic offers. The ultimate price should neither be so low that it jeopardizes the seller financially nor so high that it deters interest.
A CMA focuses on comparing the property to other similar homes by location, size, and features. It ideally evaluates homes sold within the past three to six months in the same or nearby subdivision. In more sparse or rural markets, a formal appraisal might offer more accuracy.
Although non-licensed, experienced real estate agents or brokers can perform CMAs, professional appraisals often hold more credibility in formal valuations.
What’s in a CMA Report?
When conducted by an agent or broker, a CMA report captures essential comparative data. While CMAs follow no standardized template, some states mandate specific inclusions.
Typically, a CMA report contains:
- The address of the property and three to five comparables
- Descriptions of each property, including design aspects, number of bedrooms, bathrooms
- Square footage of each property
- Sale price per comp
- Monetary adjustments for differing features
- Adjusted sold price per square foot for each comp
- A suggested price range for the property
CMA vs. Appraisal
While a CMA provides a price estimate typically used in negotiations, an appraisal, performed by a state-licensed and certified appraiser, evaluates market conditions to provide a property’s formal market value. The core difference: CMAs establish a price, appraisals determine value.
How to Do a Comparative Market Analysis
Performing an accurate CMA entails several critical steps:
1. Evaluate the Neighborhood
Examine the neighborhood, considering community amenities, nuisances, HOA rules, school proximity, and overall curb appeal. This broader context often impacts property value significantly.
2. Gather Property Details
An agent or broker will review existing listings (or conduct a new visit) to gather in-depth details such as property size, age, style, finishes, and landscaping. Recent upgrades and condition refurbishment are also crucial review points.
3. Select Comparable Properties
Identify three to five recently sold properties close to your target home. Ensure comparables reside within the same school district and showcase similar features like square footage, lot size, and bedroom/bathroom count. The more recent the sale, the better.
4. Adjust for Differences
Identify and adjust for differences between the property and its comps. For example, superior features of a comp warrant negative adjustments to its price for comparison fairness, and vice versa.
5. Determine the Price Per Square Foot After Adjustments
Divide the adjusted price of each comp by its square footage to determine the sold price per square foot. Averaging these values and multiplying by your property’s square footage outlines the prospective estimate.
Example of a Comparative Market Analysis
Often generated using professional software, CMA examples help streamline obtaining a comprehensive, polished report. For DIY efforts, utilize spreadsheets or online property tools.
Example: Comparative Market Analysis charts and data visualization
Is a CMA As Good As an Appraisal?
While a CMA provides an estimated price reflecting current market activity and comparative sales, its accuracy and credibility may not match that of an official appraisal by a licensed appraiser trusted by lenders.
FAQs about Comparative Market Analysis
What Does a CMA Include?
A CMA involves comparing location, size, age, style, materials, and condition against recently sold comp properties, standardly executing a six-month range.
What’s the Purpose of a CMA?
CMAs help sellers set fair price points and ensure buyers are making competitive offers fitting current market trends.
What’s the CNS’s Primary Difference From an Appraisal?
A CMA can be compiled by virtually anyone whereas appraisals require a certified, licensed appraiser.
The Bottom Line
The best CMAs originate from optimal comparables reflecting recent sales with minimal adjustments. Amid varying market conditions, tweak the listing price accordingly to maintain competitiveness without compromising on valuation strategy.
Related Terms: Appraisal, Comparable Properties, Market Analysis, Real Estate Agent, Home Listing.
References
- North Carolina General Assembly. “Article 6. Broker Price Opinions and Comparative Market Analyses”.
