Comparative Market Analysis

What is a CMA Report?

A comparative market analysis, often referred to as a CMA, serves as a valuable resource wielded by real estate professionals to aid clients in ascertaining a property’s worth. This comprehensive report delves into the details of at least three recently sold properties akin to the one under scrutiny. Selection criteria for these comparable properties typically revolve around factors such as size, location, age, and quality, aiming to draw insightful parallels.

For prospective buyers and sellers, CMAs become instrumental in ensuring they formulate competitive offers for homes. Sellers leverage this tool to establish an accurate listing price for their properties.

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ACTIVE LISTINGS
Properties currently on the market are liable to be mispriced, making it uncertain to discern their true value until they are sold.

PENDING LISTINGS
Pending listings are unreliable indicators of a property’s worth. In the event that your agent can gain access to the contract price of a pending listing, rather than relying on the public list price, that property might become a valid comparable.

DEACTIVATED LISTINGS
Since the actual selling price remains a mystery, properties recently pulled off the market are usually omitted from CMAs.

A Comparative Market Analysis in Action

To illustrate the concept further, let’s consider a scenario where you express interest in a home currently listed at $230,000. This property is a single-family home in the city, boasting three bedrooms, two bathrooms, and falls within a reputable school district. Moreover, it features affordable HOA fees (under $100 per month) and has undergone recent updates, including fresh paint, new finishes, and enhanced landscaping.

In order to compile a comparative market analysis for you, your agent would base it on the following criteria:

1. Sold Date: Comparable properties are typically those sold within the past three to six months, or within the last year in rural areas.
2. Location: Comp properties often reside within the same school district, neighborhood, and share similar surroundings. For instance, if the property under scrutiny sits on a quiet cul-de-sac, the ideal comps should mirror this setting.
3. Size: Comps are selected based on the number of bedrooms and bathrooms, usable square footage, and the presence or absence of a basement and garage, closely matching the subject property.
4. Year built: Ideally, comps align in age unless one has undergone substantial renovations.
5. Quality: The chosen comps should feature similar updates, finishes, and overall maintenance standards.
6. Taxes and fees: Savvy real estate agents strive to identify comps with similar HOA assessments and tax figures. This meticulous matching process ensures that all relevant factors remain closely aligned.

It’s essential to acknowledge that no two homes are identical, and agents aim to find the closest match to the subject property while adjusting as necessary to deliver an informed estimate of the home’s value. For instance, valid comps may include:

• Comp 1, which sold for $235,000. It possesses one fewer bathroom, is on the same street, and exhibits similar finishes but features a smaller yard.
• Comp 2, which sold for $275,000. It boasts the same number of bedrooms and bathrooms, has a more recent build, and provides additional square footage due to a finished basement.
• Comp 3, which sold for $245,000. It shares the same number of bedrooms and bathrooms and similar size but lacks the same level of updates.

These comps would suggest that the home you’re eyeing falls within a value range of $255,000 to $270,000, providing you with valuable insight for formulating a competitive offer.

The Role of Price per Square Foot in a CMA

The inclusion of price per square foot in a CMA hinges on the local real estate market and the availability of suitable comps. Its relevance becomes apparent when evaluating homes with striking similarities. However, its applicability may vary, as it may not provide a reliable metric when comparing distinct property types, such as single-family homes to condos or newly renovated homes to outdated ones.

Distinguishing a CMA from Independent Online Comp Research CMAs, essentially derived from the expertise of local real estate professionals, stand apart from self-conducted online comp research in several ways. While preliminary online research can be informative, CMAs offer distinct advantages:

Enhanced Accuracy

Real estate agents possess access to nuanced information that may elude buyers, allowing them to uncover the reasons behind unusually high or low comp prices. For instance, they might contact listing agents to discern factors like seller closing credits influencing a high price or cash buyers affecting a low one.

Unique Information

Agents can tap into the local MLS, accessing a wealth of specific listing details directly from the listing agent. This access extends to information about the financing specifics of recent comps, a crucial factor influencing the final sale price.

Local Market Acumen

Each real estate market exhibits unique characteristics, and an agent crafting a CMA is well-equipped to make price adjustments that account for locality-specific differences in property values, desirability, and demand.

Remember, CMAs play a pivotal role in the home buying process, guarding against overpayment—a concern of utmost significance when considering your largest investment, your home. Overpaying can lead to consequences ranging from lender appraisals falling short to diminished returns upon selling the property.

Obtaining a Comparative Market Analysis If you are currently working with a licensed agent, they should seamlessly provide CMAs for each home you contemplate making an offer on as part of your home shopping journey. Often, this service is rendered proactively, aligning with their duty to help you establish a competitive offer price.