What Is A Comparative Market Analysis (CMA) In Real Estate? A comparative market analysis is a tool that real estate agents use to estimate the value of a specific property by evaluating similar ones that have recently sold in the same area.
- 1 How do you calculate CMA?
- 2 How do I get a CMA for my house?
- 3 Is Zillow a CMA?
- 4 How much does a CMA cost?
- 5 What’s the primary purpose of a CMA?
- 6 Is a CMA free?
- 7 Is a CMA an appraisal?
- 8 What is a CMA?
- 9 Which neighborhood factor must be considered when using a CMA?
- 10 What does BPO stand for in real estate?
- 11 Which is better CMA or appraisal?
- 12 What is zestimate value?
- 13 What would be the highest and best use for a vacant property?
- 14 Comparative Market Analysis: A Guide
- 15 Comparative Market Analysis
- 16 Understanding Comparative Market Analysis
- 17 What’s in a CMA Report?
- 18 How to Do a Comparative Market Analysis
- 19 The Bottom Line
- 20 What is a CMA in Real Estate?
- 21 How to Do a Comparative Market Analysis: A Step-by-Step Guide
- 22 Before We Get Started, Did You Know That CMAs Will Get You Listings?
- 23 How to Do a Comparative Market Analysis in 7 Steps
- 23.1 1. Gather All the Data Available About the Subject Property
- 23.2 2. Gather Your Subject Property’s Previous Sale / Listing Data
- 23.3 3. Gather Recently Sold Comps
- 23.4 4. Gather Active Listing Comps
- 23.5 5. Evaluate the Micro Market Trends of Your Subject Property
- 23.6 6. Put the Pieces of Your Comparative Market Analysis Together Into a Final Product
- 23.7 7. Package Your ResultsShare With Your Clients
- 24 Comparative Market Analysis FAQs
- 24.1 What’s the difference between a comparative market analysisan appraisal?
- 24.2 The range of my three numbers is too wide. What do I do?
- 24.3 What’s the most important property trait I should consider in my comparative market analysis?
- 24.4 How many comparables should I use in my comparative market analysis?
- 24.5 Where should I get my comps data for my comparable market analysis?
- 24.6 My results are different from my colleague’s results. What gives?
- 25 Final Thoughts
- 26 What Is a Comparative Market Analysis (CMA) in Real Estate?
- 27 How comparative market analysis (CMA) works
- 28 Factors considered in a CMA report for real estate
- 29 Benefits of a CMA for real estate
- 30 How to perform your own CMA for real estate
- 31 The bottom line
- 32 How To Do a CMA – Step-By-Step For Real Estate Agents
- 33 What is a CMA in Real Estate?
- 34 What’s Included In A Comprehensive CMA?
- 35 CMA Rules of Thumb
- 36 How to Do a CMA – “Easy” Property
- 37 How To Do A CMA – Difficult Properties
- 38 Additional CMA Tools
- 39 What To Bring To Your Listing Presentation
- 40 Comparative Market Analysis FAQ
- 41 Would You Like To Partner With Me?
How do you calculate CMA?
The CMA Result is calculated by multiplying the price per square foot of your lowest and highest comps to the living area of your subject property creating the range. The CMA Result is the average. Lowest price per square foot comp x number of square feet of subject property = low end of range.
How do I get a CMA for my house?
You can either scan lists of homes that have recently sold or get a report prepared by a local real estate agent, who will contact you and probably try to solicit your business at that point. Alternatively, you can purchase a CMA report, for example, at www.ushomevalue.com.
Is Zillow a CMA?
We encourage both our customers and our industry partners to supplement the Zestimate Market Analysis with other research such as visiting the home, getting a professional appraisal of the home, or having a real estate agent complete their own comparative market analysis (CMA).
How much does a CMA cost?
CMA program entrance costs $225, but student or academic IMA members are eligible for a $150 discount. CMA exam fees are $300 or $350 per part, depending on how you register and when you take the exams, for a total of $600 or $700.
What’s the primary purpose of a CMA?
A comparative market analysis (CMA) is an estimate of a home’s value used to help sellers set listing prices, and to help buyers make competitive offers. The analysis considers the location, age, size, construction, style, condition, and other factors for the subject property and comparables.
Is a CMA free?
A CMA is how an agent arrives at a listing price, and they provide CMAs as part of their listing services. So yes, you can get a free CMA, even if you’re not ready to sell at the moment.
Is a CMA an appraisal?
The main difference between an appraisal and a CMA is the personnel involved. Whereas a CMA is conducted by a real estate agent, an appraisal is carried out by a licensed appraiser on behalf of the bank. Once a buyer applies for a loan to purchase your home, the bank will order an appraisal of the property.
What is a CMA?
The certified management accountant (CMA) designation indicates expertise in financial accounting and decision-making. This certification prepares professionals for a wide variety of careers. CMAs are required to adhere to a strict set of professional standards, in addition to passing a rigorous two-part exam.
Which neighborhood factor must be considered when using a CMA?
Several factors are used when conducting a CMA to determine the best comparable properties: Age of the property: A house built three years ago won’t have the same value as a very similar house built 12 years ago. Number of bedrooms and bathrooms: This is an important factor, and relates to the next point.
What does BPO stand for in real estate?
A broker price opinion, commonly known as a BPO, is a real estate professional’s opinion of a property’s value. BPOs are most often used when setting the list price of a property, similar to a comparative market analysis, and in the case of a foreclosure or short sale.
Which is better CMA or appraisal?
In today’s market you can expect appraisal values to be more conservative and values in a CMA to be more aggressive with the purpose of getting the highest amount for a seller or getting the best deal for a buyer – the CMA will always favor buyer or seller depending on who is asking for the analysis.
What is zestimate value?
What is a ZestimateⓇ? Zillow’s Zestimate is an estimate of value using a proprietary formula created by the online real estate database company. Zestimates cover more than 100 million homes across the United States. A Zestimate is calculated from physical attributes, tax records, and user submitted data.
What would be the highest and best use for a vacant property?
The definition of highest and best use is as follows: The reasonable, probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value.
Comparative Market Analysis: A Guide
The agents perform a search for recently sold houses in the same area that are as comparable to the subject property as feasible in order to complete the study. These residences, which are referred to as comps, or similar sales, are utilized in the pricing process to undertake a sales comparison technique. In this method, the assumption is that you can determine the value of a property by determining how much it would cost to acquire a similar home of equivalent attractiveness in the neighborhood.
The Rule Of Three
The first step for an agent creating a CMA is to discover three houses that have sold lately (within the previous 6 months at most, but ideally 3 months) (within the past 6 months at most, but preferably 3 months). These three residences should be as identical and positioned as closely together as feasible. Once at least three comparisons are identified, each one is meticulously investigated to find how it varies from the property in issue. After the variances are identified and priced out, the sales price of each comp is adjusted to estimate how much it would cost if it were virtually identical to the subject property and sold in the current market.
Understanding How Real Estate CMAs Differ From Appraisals
Although a comparative market study use comparable housing market indicators to evaluate and determine regional home values, it is not regarded an official home evaluation in the same way that an official home appraisal is. Unlike house appraisals, which are performed by appraisers in order to determine the worth of a property, comparative market analyses (CMAs) are undertaken by certified real estate professionals in order to determine the fair market value of a home. However, even though the resulting value is an approximation that takes into account both seller and buyer objectives, a CMA is a complex process that requires technical knowledge of the overall market as well as how various aspects of real estate affect how much a property is worth in the current market environment.
Taking Market Conditions Into Account
When it comes to comparative market analysis and price determination in general, the market circumstances are a wild card. That is why it is preferable to utilize properties that have sold within a reasonable amount of time of the home currently being valued. A strong buyer’s or seller’s market has the potential to cause CMA values to fluctuate. In the case of a fast gentrifying area, for example, it is possible that there are no solid comparables because home values might fluctuate substantially in a matter of months.
Comparative Market Analysis
A comparative market analysis (CMA) is a method of estimating the worth of a house by comparing it to previously sold, similar properties in the surrounding region. Real estate agents and brokers prepare comparative market analysis (CMA) reports to assist sellers in setting listing prices for their properties and, less frequently, to assist purchasers in making competitive offers.
It is possible for individuals to do their own comparative market study by researching similar properties (often referred to as “comps”) on real estate listing websites such as realtor.com.
- A comparative market analysis (CMA) is an assessment of a home’s worth that may be used to assist sellers determine listing prices and to help purchasers make competitive bids on homes for sale. The location, age, size, structure, style, condition, and other variables of the subject property and comparables are taken into consideration throughout the study. For those who are interested in a comparable market analysis for a specific house, you may consult with a local real estate agent or broker for assistance or conduct your own research by comparing properties online.
Understanding Comparative Market Analysis
A comparative market analysis (CMA) assists sellers in determining the most appropriate listing price for their properties. The “optimal” price is the one that is neither too low nor too expensive, so that money is not left on the table and the property sells quickly yet at a reasonable price. An accurate comparative market analysis helps determine whether or not a house represents excellent value and assist in creating a competitive offer that will be considered seriously—without going overboard.
In an ideal situation, a CMA would include recently sold properties from the same subdivision as the subject property being appraised.
In certain instances, a formal assessment may be a more appropriate choice.
Nonetheless, some jurisdictions will hold real estate agents and brokers liable if they fail to conduct a CMA in a professional manner.
What’s in a CMA Report?
The conclusions of a comparative market study will be documented in an official report produced by the real estate agent or broker who conducted the analysis. While there is no standard CMA report, it will often include the following information:
- Three to five comparable properties and the address of the relevant property are provided. The location, elevation, floor plan, and number of bedrooms and bathrooms for each home
- Each property’s square footage is specified
- The retail price of each comparable
- Adjustments in dollars for any discrepancies
- The average adjusted sales price per square foot of each comparable property
- The current fair market value of the given property.
The majority of real estate agents and brokers rely on software to compile extensive (and professional-looking) comparative market analyses (CMAs). If you want to design your own, keep track of your research in a spreadsheet, or utilize an online home-price tool provided by one of the several real estate listing websites. An example of a CMA report is shown below. This is an example of a report.
How to Do a Comparative Market Analysis
A comparative market analysis (CMA) entails much more than simply comparing the prices of previously sold properties in the region. The following is a rundown of the fundamental phases in developing an accurate CMA:
1. Evaluate the neighborhood.
The CMA should take into account the overall quality of the area in order to determine the appropriate listing price—or to determine whether a house you’re interested in is a good value. Where are the more visually appealing blocks to be found? How near are the community’s facilities to where you live? What is the proximity of nuisances in the community? What are the regulations of the HOA? How are the educational institutions doing? Is there anything wrong with the curb appeal?
2. Gather details about the subject property.
An agent or broker who does the CMA will study the existing listing (if there is one) and conduct an in-person visit to obtain information on the subject house, if one is available.
When evaluating a property, they will consider its size (especially the amount of liveable space), its age, its style, its construction, its condition, its layout, its finishes, its landscape, and any modifications and additions.
3. Select comps.
Search the region for three to five recently sold similar properties in the same price range and as near to the subject home as feasible. Ideally, the comparable properties will be located within one mile of the subject property and in the same school district as the subject property. Concentrate on properties that are similar to the subject home in terms of square footage, lot size, number of bedrooms, number of bathrooms, and building type. Keep a close eye on the date on which the comparable property sold: A recent sale is preferable since real estate prices can vary dramatically.
4. Adjust for differences.
Adjusting for variations between the subject house and each similar property is the next stage in the process. In the hands of an expert real estate agent or broker, each of the discrepancies may be assigned a monetary value, and the value of each comparable property is adjusted appropriately. Contrary to popular belief, if the comparison property contains a feature that is inferior to the subject property, a positive adjustment is made to the value of the comparison property, and vice versa.
The extra bedroom would be deducted from the comp in this situation, allowing you to do an apples-to-apples comparison between the two properties.
5. Determine the sold price per square foot after adjustments.
Calculate sales price per square foot by dividing the adjusted price of each comp by the square footage of the comp in order to account for variances in pricing. After that, sum up all of the sales prices per square foot from all of the comparable properties and divide the total by the number of comparable properties to obtain the average. Finally, divide this average by the square footage of the subject property to arrive at the current market value of the property.
The Bottom Line
In general, the best comparable properties are those that are the most similar to the subject property, have recently sold, and require the fewest revisions to be used in the appraisal. Depending on the market, it may be necessary to make a minor adjustment to the final pricing. Depending on the market conditions (for example, high demand or tight supply), prices may be slightly higher. In contrast, if there are a large number of identical properties on the market, the price may need to be reduced in order to remain competitive.
What is a CMA in Real Estate?
If you’re selling in a seller’s market, such as the one Texas is now experiencing, when there are numerous bids on practically every house, starting the process with an acceptable listing price is critical to getting the transaction completed as quickly and smoothly as possible. While most sellers are interested in learning how much their house is worth, for the most, this is still a mystery. Help is on the way. A comparative market analysis (CMA) is one of the most useful services a real estate agent can give (CMA).
- What exactly is a CMA?
- A real estate agent will look at previously sold properties in a certain area, consider a variety of characteristics, and run the information through a variety of systems to determine the fair market value of the property.
- Each real estate agent will have their preferred tools and data sets, but regardless of the methods employed, it is unquestionably one of the services to inquire about with your agent prior to selling your house.
- When a licensed appraiser does an appraisal, it is normally done after the contracts have been exchanged between the parties involved.
- Instead, its objective is to ascertain the assessed value of a given property — and the service is one of the additional fees that homeowners should consider when planning to sell their house.
- In 2020, there will be 393,615 houses sold in Texas, and each transaction generates significant data that may be used to get insight into the market.
- Benefits of the profession include access to the Realtor’s Property Resource (RPR), a nationwide database of house sales, and the Multiple Listing Service (MLS), which keeps track of recent home sales in a particular region.
- The fact that famous real estate websites are often benchmarks that the majority of purchasers will use leads real estate brokers to frequently include them as references, with the proviso that price ranges on these websites are frequently considerably different from the ultimate sale amount.
The property for sale will be displayed alongside a selection of previously sold properties in the immediate vicinity in the comparative market research report.. The following are the most important criteria that will typically determine the value of any home:
- The amount of space available. It is important to note that as the square footage increases, the price per square foot decreases. The number of bedrooms and baths, which is one of the reasons why adding an extra room might increase the sale price
- The number of bedrooms and baths
- Age, which includes both the year the structure was built and the amount of time it has been on the market since it was first listed
- Constructing and decorating a home includes everything from the design to the materials to the number of levels and even the exterior amenities (pool, yard, etc.) and curb appeal. Neighborhood. What kind of amenities are there? Is there a set of HOA regulations that must be followed? What is the overall rating of the schools
The process of doing a comparative market study in one of our Texas metro regions is rather uncomplicated, thanks to the abundance of recent data available. The process of establishing a benchmark is more difficult in rural locations with fewer available homes for sale or for newly restored houses. Identifying the sweet spot Just one of the factors that may aid in the sale of a property as soon as it is placed on the market is setting the correct price for it when it first goes on the market.
- After all, a house is a personal possession, and the seller will be intimately familiar with each space and peculiarity.
- An important factor in many home searches is the facilities, particularly schools, that an area has to offer to prospective buyers.
- With no comparative market study, a house for sale may be priced too high, causing it to sit on the market for longer than required — or potentially not find a buyer at all — or it may be priced too low, resulting in money being left on the table in the form of commissions.
- An agent from Briggs Freeman Sotheby’s International Realty can translate their local knowledge and skills into concrete value for you in a variety of ways, including providing a professional CMA at the beginning of the process.
How to Do a Comparative Market Analysis: A Step-by-Step Guide
In real estate, a comparative market analysis (CMA) is a procedure that real estate professionals use to assess the market worth of a property by comparing it to similar properties that have recently sold as well as to homes that are presently on the market. A comparative market analysis (CMA) is an important tool for listing agents when determining a price for new houses for sale. Also useful for buyer’s agents who are recommending their clients to make competitive offers on a property. It is difficult to conduct CMAs that are accurate and consistent.
To help you create watertight CMAs every time, we’ll guide you through the full process in this post, and we’ll also provide you with a free CMA presentation template so you can share your results with customers.
Before We Get Started, Did You Know That CMAs Will Get You Listings?
Yes, it is correct. A well-crafted, consistent CMA will result in more listings for you while also making your sellers more satisfied as well (and, in turn, better reviews). When you come up for a listing interview with a complete, reasoned, and well-presented comparative market analysis (CMA), you will without a doubt stand out among your competitors. As evidence of understanding, according to The Close Proreal estate coach Sean Moudry, a good comparative market analysis (CMA) is one of the three main factors he considers as vital to landing more listings (the other two areevidence of activityandevidence of success).
A basic automated CMA tool, such as the one included in the Elevate Real Estate CRMplatform, is a wonderful method to swiftly and efficiently communicate all-digital value estimates with colleagues and clients.
Check out our Elevate Deep Dive Review for more information about their CMA tool, or click the button below to get started with Elevate. Pay a visit to Elevate
How to Do a Comparative Market Analysis in 7 Steps
Having established what a comparative market analysis is and why it is so beneficial, let’s take a look at what you will need to construct a comparative market analysis that will wow any homeowner. THE FINAL PRO TIP:We’ve combined all of this information into a printable PDF guide, which includes a handy one-page fast reference for your convenience. Download the guide here. Here is where you can get your CMA Guide.
1. Gather All the Data Available About the Subject Property
The phrase “subject property” refers to the property for which you are evaluating the market value in a comparative market analysis. Because the most important function of a CMA is comparison, we must first learn everything we can about the subject property in order to identify other comparable properties with which to compare it later.
How We’ll Use Subject Property Data in a CMA
In order to estimate the worth of the property, we will compare it to other, similar properties that have either just sold or are presently on the market, based on the Subject Property Data we have. Knowing as much as we can about our subject property will enable us to make more accurate comparisons later in the process. You should keep in mind that if you want to estimate the worth of a property, let alone sell it, you must be an expert in every element. You’ll be able to judge a property’s worth more accurately the more information you have about it, especially when comparing it to similar previously sold houses and properties now on the market—not to mention its value in relation to broader market trends.
You will require at a bare minimum the following information:
- A specific location (a street or a neighborhood, a town or a county)
- The total square footage
- The number of bedrooms and baths
- The amount of land (if the property is privately held)
- The year when the building was constructed
- Renovations or significant alterations have occurred since the house was last sold
- Interior finishes to take notice of
- Any unusual features (such as a swimming pool, a pole barn, or other structures)
- Taxes paid in the current year / millage rate
PRO TIP FOR THE CLOSING: You may obtain a lot of this information from the Multiple Listing Service (from past times your subject property has been listed), from tax records and county/township websites, and perhaps most crucially, from the owner of the property himself or herself. The owner of the home will have personal knowledge of facts that the MLS or tax records will not have, so be sure to conduct a comprehensive interview with them to obtain all of the subject property’s pertinent information.
2. Gather Your Subject Property’s Previous Sale / Listing Data
What the market will bear for a given property is the greatest predictor of what the market will bear for that property. The prior sale and listing history of a particular property might provide insight into what the market has (or hasn’t) supported for the property in the past, allowing for more accurate pricing. It also assists us in beginning to assess the worth of the home in relation to the movement of the overall market since the last time the subject property changed hands.
How We’ll Use a Subject Property’s Previous Sale / Listing Data in a CMA
With the use of our Subject Property’s previous sale data, we’ll be able to estimate the first dimension of a home’s worth based on the overall trend of the market since it was last sold. Consider the following scenario: your subject property hasn’t been sold in five years. The median house price in the market segment where the subject property is located was $200,000. At the time of writing, the median price in the same niche is $210,000. With a 5 percent growth in the value of our subject property, we may infer that the value of our subject property would increase in the same manner.
Preparation step: Collect all of the information you can on the prior sales and listings of the subject property in question. You’ll need at the very least the following items:
- Prices paid in the past
- Prices paid in the past
- Information about the property
- Price modifications
- Days on the market
THE CLOSE PRO HINT: Don’t forget about the statistics on unsold properties. To conduct a successful CMA, it is essential to understand the conditions under which your subject property was placed for sale (but did not sell). In the same way that a sale shows that the market supports a given value, an unsold property implies that the market will not support a particular price.
3. Gather Recently Sold Comps
Being able to identify meaningful comparable sales (often known as “comps”) is the second most critical stage in doing an effective comparative market study, following only the comprehension of your subject property. The term “comps” refers to properties that share main characteristics with, or are at least substantially close to, the characteristics of our subject property. A solid comp is a property that has the following characteristics:
- Sold within the previous 12 months (or, in fast-moving markets, within the last six months)
- Located in close proximity to your subject property on a map
- And Closed within a fair number of days on market and selling conditions.
The more unlike a comparable property or property to your subject property is, the poorer it will be in predicting the value of your property.
How We’ll Use Recently Sold Comps in a CMA
We’ll estimate the second dimension of our property’s worth based on what the market has lately borne for equal (or similar) property, and we’ll do so using recently sold comparables. Steps to take: Find four or five recently sold homes that are similar to your subject property in terms of the important criteria we outlined in step one and that were sold within the last year using your local multiple listing service. Why is it only for a year? We are all aware of how quickly the market may shift.
THE FINAL PRO SUGGESTION: Finding comparable properties can be difficult at times, especially if your subject property is one-of-a-kind in its own right.
Subjective factors (such as architectural design and landscape) are more difficult to compensate for than objective criteria (such as acreage, square footage, and new facilities with explicit price tags, such as a new roof or new appliances).
4. Gather Active Listing Comps
An Active Listing Comparable is identical to a Recently Sold Comparable, with the exception that it is actively on the market, as you might have predicted. Using Active Listing Comps is critical to the CMA process because they provide us with insight into what our subject property would likely experience in terms of activity if it were to be listed in the current market circumstances.
How We’ll Use Active Listing Comps in a CMA
Active Listing Comps will be used to estimate the third and final dimension of our property’s worth, which will be based on the current market’s reaction to similar listings in the area. As part of this analysis, we’ll determine the degree of competition we’ll encounter if we join the market at different pricing points. Steps to take: Find four or five current properties that are similar to your subject property in terms of the important criteria we outlined in step one, and enter them into your MLS system.
One of the greatest Active Listing Comps is one that is currently under contract but has not yet been sold by the seller.
They may have information that may provide you with more insight into the worth of your home.
Furthermore, if their home is now under contract, it is possible that they have buyers who are interested in purchasing a property similar to your subject property. Get it sold before you put it on the market!
5. Evaluate the Micro Market Trends of Your Subject Property
Despite the fact that the term “micro market trends” appears to be high-falootin’, it is only a fancy way of expressing “keep in mind what’s going on in the neighborhood.” Consider the following scenario: a big road construction project is underway just a few blocks away from your home. The fact that the general trend in your neighborhood’s market is improving nonetheless, this micro market trend may result in a lower final figure on your comparative market research. – A similar scenario occurs when an apartment building has just established 24-hour doorman service, which will cause the price of the apartment to rise by a little margin above the price of the market research you’ve conducted so far.
How We’ll Use Micro Market Trends in a CMA
We may use this information to change our overall value forecasts upwards or downwards in response to our discoveries. Steps to take: “Is there anything happening in the nearby vicinity of your subject property that might cause the price of the home to rise or fall?” – Collect responses to the following question: “If so, by how much?” says the author.
6. Put the Pieces of Your Comparative Market Analysis Together Into a Final Product
You’ve done an excellent job, conducting all of the essential research to put up a terrific CMA. You are well-versed in the specifics of your subject property, you are familiar with the recent sales history of similar properties, you are aware of what the market is currently offering in terms of comparables, and you are aware of any factors that may influence the sale price of your property in your local market. The question then becomes, how can we bring all of this information together into a finished product?
A. Start With Your Subject Property’s History
To begin, look at the sales history of the property under consideration. Since your home was last sold, the median price has increased (or decreased) by a specific percentage. What do you think the present valuation of the subject property should be based on this (taking into consideration any modifications or adjustments that have been done to the subject property)? This number will be the first in your range of predicted property values for the property in question. Here’s an illustration:
B. Move to Your Recently Sold Comps
After that, have a look at your comparables for recently sold real estate. Taking into consideration what you’ve discovered, what does the value of these qualities tell you about the worth of your topic property? This number will be the second in your range of predicted property values for the property you are predicting. Here’s an illustration:
C. Look at Your Active Listing Comps
Repeat the previous step, but this time utilize the comps you’ve gathered from the active market instead of the ones you used previously. This number will be the third in your range of predicted property values for the property you are predicting. Here’s an illustration:
D. Arrange Your Predictions From Lowest to Highest
The results of your market research should show a pattern with three values that are pretty near to one another if you have done your study thoroughly and consistently.
To determine the market worth of your subject property, arrange the figures from lowest to highest in the following order: conservative, moderate, and aggressive.
E. Don’t Forget Your Micro Market Trends
Finally, make sure to incorporate any Micro Market Trends into your forecasts.
We understand what you’re saying. The odds are that your desk is covered in papers, that you have 20 tabs open on your web browser, and that your mind is full of data—but hallelujah, you have your findings! You cannot, on the other hand, just provide your client a range of numbers. They require a presentation, they require context, and, above all, they require an understanding of how you arrived at the solution you have supplied. You’ll be required to submit evidence of your effort, just like your eighth grade math instructor expected of you.
Download your CMA Presentation Template.
Comparative Market Analysis FAQs
Despite the fact that you are now an expert on all things CMA, we understand that you may still have questions. In this section, we’ll go through the most often asked questions (as well as helpful responses) that we get concerning comparative market assessments.
What’s the difference between a comparative market analysisan appraisal?
An appraisal and a comparative market analysis differ in a few minor ways, but these distinctions are significant. When a professional appraiser does an appraisal on a property, it is generally done to determine the current worth of a property for the purpose of financing or insurance. Performing a comparative market analysis (CMA) for the purpose of calculating a list or selling price on the basis of similar sales and market trends is the responsibility of a real estate agent or broker.
The range of my three numbers is too wide. What do I do?
This is generally an indication of one of two things: either your CMA range is too vast to be useful, or your CMA range is too narrow to be useful. In either case, your comps aren’t comparable enough to your subject property, or you’re making an erroneous prediction about how much the market has grown (or shrunk) since your subject property’s previous sale. Consider going back and looking at both perspectives again to see if there are any better comparables available or if your assessment of the overall market movement may be improved.
What’s the most important property trait I should consider in my comparative market analysis?
When it comes to assessing the value of a property, location is the most significant factor. The location of a property dictates how distant it is from various amenities such as schools, hospitals, and the ocean. It also impacts the amount of property taxes owed on the residence. When looking for comparable properties to utilize in a CMA, it is critical to select ones that are in similar geographical regions.
How many comparables should I use in my comparative market analysis?
The greater the number of comparisons, the better. I should qualify that by noting that the more comps you have, the better—as long as they’re accurate, of course. When preparing a CMA, there is sometimes a strong urge to include a large number of comparable properties; nevertheless, doing so may result in the inclusion of a property that isn’t quite similar enough to your subject property. Don’t forget that establishing apples-to-apples comparisons is critical to the CMA process, so don’t start putting oranges into the mix merely to dazzle your customer with a complete bag of goodies.
For sold properties, a good number of comparables is between three and five, and the same is true for houses that are currently on the market.
Where should I get my comps data for my comparable market analysis?
Whenever feasible, you should obtain your information from your local multiple listing service (MLS). Despite the fact that Zillow is a terrific site for customers to gather information on real estate (and a great place for you to generate leads), your MLS will contain far more information on each listing. Furthermore, third-party websites sometimes do not offer a history of a property’s price fluctuations or the number of days it has been on the market. In order to locate comparables for your comparative market study, you’ll want to analyze both of these factors.
My results are different from my colleague’s results. What gives?
Remember that, despite the fact that a comparative market study makes use of factual statistics such as square footage, acreage, bedroom count, and the like, it is ultimately a tool that relies on subjective feedback from you, the real estate agent, to provide accurate results. For example, if you’re examining a comparable home that is identical to your subject property but for the fact that it includes an additional bathroom, what value do you allocate to the additional bathroom in your adjustment calculation?
Don’t be concerned if your conclusions differ from those reached by other real estate agents.
Trust in your methodology, and if the market provides you with constructive input on your final statistics, look for areas where you can make changes to your CMA process to make your next CMA even better.
Understanding how to do a comparative market study is not a simple issue to answer, but it is one that can be answered. You should now have a clear grasp of how to more accurately assess the worth of a property in your market area. Take use of this information to improve the accuracy of your sellers’ list pricing and the competitiveness of your buyers’ offers. Do you have any more questions? If you want to continue the conversation, join our Facebook group, The Close Real Estate Agents Mastermind Group.
What Is a Comparative Market Analysis (CMA) in Real Estate?
Real estate has traditionally been the preferred investment for people seeking to accumulate long-term wealth for their families and future generations. By subscribing to our complete real estate investment guide, you will receive assistance in navigating this asset class. For real estate investors, the ability to price their properties is critical. For those involved in real estate transactions, it is critical to avoid overpaying for a property, and for those involved in real estate transactions who are selling their home, it is critical to price their property reasonably in order to find a buyer as fast as possible.
Following is a guide on how to use a CMA as an investor, written with this in mind.
Continue reading to find out what a CMA is, how it works, and how to conduct your own CMA investigation. Following the acquisition of this knowledge, you should be able to utilize this sort of report to appropriately price the properties in your portfolio.
How comparative market analysis (CMA) works
The term “comparative market analysis” (CMA) refers to a real estate technique that real estate agents use to assist sellers in determining the appropriate list price for their property and, less frequently, to assist purchasers or investors in making competitive bids. A comparative market study is fundamentally concerned with examining similar properties that have previously sold in the region in order to establish how the property in question compares to the competition. To understand a CMA, it might be beneficial to think of it as an informal version of an appraisal.
This exercise, however, should not be mistaken for a formal appraisal, which will need to be completed after the home has been placed under contract if the buyer intends to take out a loan to finance his or her purchase.
Once again, you may utilize this tool to assist you in making a reasonable offer on a home.
As soon as you have this information in hand, you will be able to construct an offer that is fair to the seller while also meeting your financial objectives.
Factors considered in a CMA report for real estate
As previously said, when putting together a CMA, there are a variety of criteria that are taken into consideration. Although there are many other types of CMA reports, we’ve included a few of the more common ones below to give you a better sense of what to anticipate. Take a minute to go through them to have a better grasp of the individual elements that went into making the comparisons.
- The geographical location of each property
- Each property’s square footage and acreage are specified
- In each property, the number of bedrooms and baths is specified
- The age of each individual property
- Anything that might distinguish one property from another, such as upgrades, expansions, or amenities
- Any interior finishes that have the potential to increase or decrease the value of a house
- Each property’s current state of repair
A typical CMA report will compare three to five properties based on those criteria, with each report containing three to five comparisons. Then, based on the prices of previously sold homes, they’ll determine a price range within which the property in issue should be priced. Afterwards, you or your real estate agent will be able to examine the home in issue to decide where it sits within that price range based on its particular attributes.
Benefits of a CMA for real estate
There are several advantages to employing a CMA as a real estate investor, to put it bluntly. Consequently, we’ve laid them down below for your convenience. Take a look at them to acquire a better understanding of why you should include comparative market analysis in your investing toolkit.
On the buying end
Actually, as a real estate investor, there are several advantages to conducting a CMA.
This has resulted in the following list of resources being provided to you: Review them to obtain a feel of why you should include a comparative market analysis in your toolkit of financial analysis techniques.
On the selling end
Whenever you’re ready to sell your investment property, doing a comparative market study may help you determine whether or not it’s the perfect moment to implement your exit strategy. Compare the prices of previous sales in your neighborhood to get an idea of how much money you’ll receive when it comes time to sell your investment. Then you may use those data to assess whether or not the prospective return on investment meets your requirements, or whether you should hold off on selling for a little longer.
How to perform your own CMA for real estate
It is necessary to understand how to develop your own CMA as the following stage in this procedure. We’ve taken this into consideration and have outlined the processes for you below. In order to arrive at a close approximation of the home’s worth, you must go through each of these processes in order.
Step 1: Analyzing your investment property
First and foremost, you must do an investigation of the investment property in issue. Begin by compiling all of the pertinent property information, such as the property’s age, size, and the number of bedrooms and bathrooms it has. Then, make your best effort to provide an honest assessment of the property’s condition, as well as a list of any upgrades or features that you believe may enhance or detract from its worth.
Step 2: Finding appropriate comparables (‘comps’)
After that, you may utilize the information about the property to look for appropriate comparables. As a rule of thumb, you should seek for three to five comparable houses that have recently sold in the region within the past six months. If you can go as near to the property in issue as possible, that is preferable in this situation. Put forth your best effort to locate houses that are in the same neighborhood, have the same amount of bedrooms and bathrooms, and are in about the same condition as one another.
When in doubt, just go as near as you possibly can to the target.
Step 3: Adjusting for value
Last but not least, you must make adjustments for value. Once you’ve identified three to five comparable homes, you may utilize them to determine a reasonable price range for your investment property. Next, using the property data that you gathered in the first stage, identify where the property in question falls inside the price range you established in the second step.
Having a comparative market study available to you as an investor may be a beneficial asset to have at your disposal. This post will walk you through the different advantages of creating these reports and utilizing them to properly price your investment property or create a fair offer for your investment property.
How To Do a CMA – Step-By-Step For Real Estate Agents
An agent’s ability to do a CMA, also known as a “Comparative Market Analysis,” is one of the most important skills he or she should possess. To successfully close a transaction, whether you’re dealing with a buyer, seller, or tenant, you must first determine the worth of the property in question. However, with so much information accessible nowadays, it may be difficult to determine exactly what should be included and what should be left out of a document.
Since 2008, I’ve worked on thousands of comparative market analyses (CMAs). In today’s post, I’m going to walk you through the steps of doing a CMA.
What is a CMA in Real Estate?
“Comparative market analysis” (CMA) is an abbreviation. Occasionally, it will be referred to as a “competitive market analysis” or something similar. It entails locating comparable properties to the one you’re attempting to sell and comparing their estimated home values to yours in order to arrive at a valuation for a home that hasn’t yet sold on the market. Performing a comparable market analysis (CMA), as determined by the real estate agent, is a critical component of the real estate process that benefits buyers, sellers, and real estate professionals in general.
Using comparative market analysis, real estate brokers may notify their customers if the subject property asking price is above or below the current market price.
Lastly, for the buyer or listing agent, the comparative market study enables them to be completely prepared to address all of their clients’ price queries.
What’s Included In A Comprehensive CMA?
Individuals each have their own comparative market analysis technique that they use to do their own market research. In order to do research, arrive at an estimate, and communicate that estimate to the customer, we each employ a distinct set of programs, tools, and processes. The following are the applications that I use, listed in the order in which I use each of them.
1) Zillow Zestimate
The sheer concept of me looking at Zillow is undoubtedly making many of you cringe right now, and I get why. Who could blame you when your state has a one-star accuracy rating out of five, as it does in many states. But bear with me for a moment. No matter if your customer is a potential buyer or a seller, they have Zillow at their fingertips. Many of them assume that Zillow is the go-to source for all things real estate-related. You must be aware of the Zestimate for the subject property in order to be able to explain to your clients whether the estimate is accurate or inaccurate.
2) Realtor’s Property Resource (RPR)
Real estate agents can use the RPR system for free; all you have to do is provide your NRDS number to confirm that you are a licensed real estate agent in order to gain access. For those without access, there’s a list of options at the conclusion of this document. This will be used in the same way as the Zestimate is, as a value comparison. Constructing a Quick CMA – Whenever I’m in a bind and need to come up with a fast CMA, I’ll usually turn to the RPR app for assistance. I can enter the subject property information into this app and receive a reasonably accurate appraisal in seconds.
RPR provides an accuracy rating that, while useful, should be regarded as a work in progress. However, as long as I informed my customer that this valuation was automatic and that I would manually generate one as soon as I got the opportunity, everything was OK.
3) Tax Records
So, as you are presumably aware, the tax records will not provide you with an accurate assessment of the fair market value of the house; rather, like the Zestimate and RPR listings you’ve obtained, the tax data will serve as yet another piece of the CMA jigsaw. The Zestimate and RPR will assist you in establishing a pricing range if you don’t have a clear concept of where to begin. According to my experience as a San Antonio real estate agent, the tax records will often reflect around 90 percent of the home’s market worth.
4) MLS (Multiple Listing Service)
Now, this is the point at which we really get to work on the comparative market study calculations. When it comes to conducting CMA research, your local MLS, often known as the multiple listing service, will be your closest friend. The Multiple Listing Service (MLS) will inform you of any recent sales that have occurred in the region where the subject properties are located. By using these recent sales, you will be able to build an accurate report that is based on actual facts.
CMA Rules of Thumb
- Square feet: When looking for homes in your MLS, I recommend that you set the square feet filter to within +/- 10% of the square footage of the subject property you’re interested in. The goal is to set the filter for the age of the home to be within +/- 5 years of the age of your subject property
- However, this is not always possible. Generally speaking, I attempt to keep my searches inside the same neighborhood as my subject property, but there are situations when this is simply not enough. My recommendation is to broaden this to include a half-mile to a mile radius around the area in which the subject property is located. If that is essential, I propose that you make sure the other filters are as tight as possible to guarantee that you end up with a property that is as comparable as feasible
- Type of residence: Is it a single-family residence, a townhouse, a ranch, a duplex, or something else? Setting a filter for this will assist you in finding more comparable postings that are closer to you. Beds and bathrooms: You may also enter the total number of beds and bathtubs in the filters. – If you are looking for half bathrooms, you may use this filter to round down or up as appropriate depending on the situation. Suppose your subject property has 2.5 baths
- You may broaden your search to include properties with anything from 2 to 3 baths. Garage: Does the house have a garage, and if so, what kind of garage is it? Is it a part of the home that was built from the beginning, or was it added later? Stories: Does the property have more than one storey, or perhaps an additional room, to offer to potential buyers? If you’re receiving an excessive number of similar sales, applying this filter may help you reduce them down. Unless your subject property contains a pool (which is uncommon), it is required to account for it when assessing the value of your subject property in a CMA. The current state of construction is as follows: Is the house a new construction or has it been in the same family for some time? Was the building recently renovated? Was it ever a private residence or has it always been a rental property for sale? In order to determine the comparative market analysis, you will need to take into consideration the following factors: When it comes to listing age, I prefer to set the listings filter on my MLS to 6 months. This assures that the market hasn’t altered much since the comp was sold for that sales price. I propose starting with 12 months and not surpassing 24 months if you need to broaden your search
- However, bear in mind that the market may have grown or reduced by a small percentage within that time period
- And Property size: I don’t always include the square footage of a home’s acreage in my study, but I’ve found that for properties in the country or with a lot of land, it may be useful in discovering more closely linked comparable listings.
How Many Comparables Should I Be Looking For?
I normally attempt to keep my range of comparables between 5 and 10 in order to maintain consistency. Obviously, if it is greater than 10, I know I need to tighten up my criteria a little bit so that I can be sure to identify the closest matching property, but if it is less than 5, I know I need to open up those filters even more.
Widening Your Search
When I need to broaden my search, I’ve found that doing so in the following sequence usually produces the greatest results:
- A measure of square footage
- An indication of age (start with 6, then 12, then 24)
- (2) Distances (two (2), four (2), and five (2) miles)
How to Do a CMA – “Easy” Property
Let’s start with the most straightforward, cookie-cutter example: a typical home in a typical neighborhood.
Step One: Getting the Zestimate and Checking RPR
I begin this approach by opening two tabs: one for my subject property and another for a blank search. I’m going to start with Zillow when I do a blank search. You should keep in mind that you may still acquire a Zestimate even if the property has not been listed yet. From there, I open a new tab in my RPR search and repeat the process. During the rest of the procedure, I will keep these two tabs open as a reminder.
Step Two: Heading To Your MLS
Your Multiple Listing Service (MLS) is the meat and potatoes of your search; it is where you will locate all of your comparables. This is the point at which we begin to use the filters that we discussed before. Keep in mind that most multiple listing service (MLS) systems allow you to store preset filters to make your search experience easier. Maintaining constant track on the number of comparables (you want between 5 and 10 results, but starting with closer to 10 is beneficial) will assist ensure that you are aware of when you need to expand or restrict your search and can react quickly.
- Copy the name of the subdivision or neighborhood
- Include a variety of square footage
- Include the year of construction
- To begin with, do not worry about the number of beds or bathtubs (I recommend starting with half baths). Subtract the number of stories from the total number of stories in the house Choose whether it’s a new construction or a previously owned property. Choose whether or not it has a swimming pool
Step Three: Analyzing Your Comparables
You’ll most likely find a mix of “available,” “active option,” and “sold” homes on your list of potential properties to consider. The term “active option” refers to a sale that is currently in progress. In this section, you’ll want to have a look at the CMA Summary.
This allows you to view the average selling price per square foot of the comparables you’ve discovered, which is useful information. In order to provide a different average in the CMA summary, you can filter out active listings from sold property if you so choose.
Step Four: Using the CMA Summary
Comparing the price per square foot of the subject property to that of the comparables will be important. It is important to note that when a property’s square footage increases, the price per square foot will decrease. Once you’ve calculated the price per square foot, multiply it by the sum of the total square feet for both your subject property and each of the comparable properties. Compare the prices you see on the Zestimate and the RPR to the prices you see on the website. This will assist you in determining the most accurate pricing estimation to quote for your CMA.
How To Do A CMA – Difficult Properties
Not every potential customer, on the other hand, has a house that looks exactly like the model. The method for obtaining a comparative market study for these sorts of properties is much the same as for other types of properties, but you may have to do a little more adjusting to your search filters.
Because it has a significant impact on the home’s value when compared to houses that are freshly constructed or have just received minor modifications over time, you want to make sure that you highlight that in your MLS search if the property has been recently remodeled. You should carefully examine the photographs of comparable properties to confirm that they are all of the same high quality in order to create an accurate comparison.
Fixer-uppers are a distinct type of property in its own right. It can be a time-consuming procedure to identify which repairs are required during a house inspection. You’ll want to pay close attention to the structural integrity of the house to see if there are any issues with it. Fixer-upper houses are divided into three categories: Your CMA process will begin in much the same way, but you’ll want to bear in mind that RPR and Zillow will not be aware of any structural integrity concerns with the property.
For this sort of property, you’ll have to depend heavily on the photographs given for the comparables to ensure that they’re all of the same high quality.
You may have a difficult time locating a good comparable house if the property is in a rural region, since the elements affecting the home’s value are more variable; you’ll need to be more flexible with your search criteria. The presence of a huge amount of land in a typical subdivision is another issue you could have with these sorts of properties. If you find yourself in this situation, you might want to consider turning off the acreage filter to get a better sense of the worth of the house itself.
Additional CMA Tools
If you don’t have access to RPR, don’t be discouraged; there is still hope for you. There are a few programs that you may subscribe to that will provide the same thing, and in some cases, even more benefits. Here are my top three picks for this year:
Subscription to Cloud CMA is around $35 per month.
Additionally, it will generate a sample real estate listing presentation for you, which you can display to your prospective customer on your iPad, as well as a comparative market analysis. It is compatible with the majority of MLS systems.
House Canary is a little more expensive than the other options, at $54 per month. It also restricts you to a maximum of 10 CMAs every month. While it is a high-quality tool, I believe Cloud CMA would be a better choice if it is compatible with your real estate MLS.
This is the most affordable option, costing $190 per year, and it is compatible with the majority of MLS systems.
What To Bring To Your Listing Presentation
When it comes to CMA research and calculations, I normally do as much as I possibly can before meeting with my client for the first time. I’ve found that a phone contact with them, a little research, and, if required, the use of Google Street View can provide me with the majority of the information I want for my project. As soon as I’ve gathered all of my information, I email a copy of the Zestimate to my customer along with a copy of the RPR report, tax reports, and MLS reports. Afterwards, I text or phone them to let them know that I’ve completed the process and that I’d like it if they could review the paperwork before I come by the property.
The CMA may be walked through with my client, and we can identify possible areas where it could be improved.
You must first ensure that you understand your customer before proceeding with this, since certain clients may be uneasy with all of the technological advances.
After Your Presentation
I’m making a point of taking copious notes during the presentation to ensure that I don’t forget anything important during the whole meeting. Then, when the meeting is finished, I send them an email with all of the specifics of our meeting; I’ve found that customers prefer this method since it provides them something concrete to remember our conversation. Furthermore, you must be prepared to market your CMA to the customer. Explain clearly how and why you arrived at the amount that you did, how and why it could differ from the number that they had in mind, and offer a pricing approach that is appropriate for the situation.
Comparative Market Analysis FAQ
I’ve received a plethora of inquiries concerning CMAs from customers and fellow real estate professionals, but the two that come up the most frequently are as follows:
Client: Is This A Fair Value?
It happens when you’re showing a customer around to your carefully picked houses, simply to get a good sense of the sort of home they may envision themselves living in, and they inquire as to whether the list price is reasonable. You’re naturally dissatisfied; after all, that stage is still ahead of you. Listed below is my recommendation for dealing with this tricky circumstance. Answer: I couldn’t possible know off the top of my head, but when I go back to the office, I’ll do a CMA and share the results with you so that we can debate it and come to a mutually beneficial choice.
It is our goal here to reduce the number of potential residences you are considering and then deal with the financial aspects of the purchase later on.
Agent: How Do I Calculate A CMA?
We’ll go into more depth about this in the second half of this post, but there’s a straightforward solution to this question as well. Answer: Thanks to technological advancements, we no longer have to do CMAs totally in our minds. When it comes to computing your comparative market study, the use of web apps and tools may be really beneficial. A CMA report is one of the most crucial tools you have at your disposal, and your MLS (multiple listing service) will be your greatest friend when it comes to putting up a report like this.
Client: Is A CMA The Same Thing As An Appraisal?
No, that is not the case. An appraisal is carried out by a professional appraiser who is licensed to do so. Typically, an appraisal costs hundreds of dollars and is conducted only after a contract has been signed on the property in question. A comparative market analysis (CMA) is a real estate agent’s best estimate of market value, whereas an appraisal is an appraiser’s best estimate of market value.
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