What is a Comparative Market Analysis (CMA)?
Known in the real estate industry by its acronym, a CMA is a computer based analysis of the market that your Realtor® will use to help you determine fair market value of your home in relation to others in the community and guide you in deciding what the listing price of your home should be you. Getting a CMA from your Realtor® is often one of the first steps you’ll take in listing your home. In most cases, this analysis looks at 6-12 month listings. The listings are broken down into three individual categories where each is reviewed and studied in detail. Those categories are:
1. Recent Sales - Homes similar to yours that have recently sold. A careful study of recent sales is a very good indicator of value. It allows you to see what buyers have actually paid for comparable homes over the recent past.
2. Active Listings - Homes similar to yours that are currently on the market. These homes are considered to be your competition. By analyzing these, it gives you an understanding of the other options serious buyers have to choose from in the current marketplace.
3. Expired Listings - Similar homes to yours that were listed and have recently expired. These listings expired without selling. Investigating these listings could lead to an indication of over pricing which could help with your final decision when setting your list price.
Of the three categories above, the one that carries the most weight is recent comparable sales. An in-depth review of recent sales will usually prove to be a very good indicator of value.
The number of days on market (DOM) for each comparable should be identified in the CMA. DOM demonstrates the importance of pricing correctly. When a property is first listed, it generates a very high level of interest from prospective buyers which reduces dramatically over time. It is important to be priced correctly from the beginning,
The CMA should also show the comparable homes’ List Price, Sold Price and % of Sale Price to List Price.
General Facts About Pricing...
There are certain factors that are within our control and some factors beyond our control when it comes to setting the price. Those factors within our control are: the appearance of the property, how aggressively we market the property and the price. Factors outside our control are: location of property, size and local amenities. It's important to accept those factors that are beyond our control and focus on the pricing and preparation.
A property priced at market value will attract more buyers than a home priced above market value. Consider that a competitively priced property will also attract a greater number of potential buyers and increase your opportunity for a quick sale.
In choosing the listings for the CMA your Realtor® will look for homes that are comparable with the following features:
Square Footage: The total square footage of a home plays a large role in a CMA. Your Realtor® will compare homes that are very similar in square footage (within 200-300 square feet is best). The square footage of a home that is much smaller or larger should be adjusted in a CMA. A CMA will also show the price per square footage for each comparable homes and provide you with selling price per square footage statistics.
Number of Bedrooms: The total number of bedrooms is an important piece of determining the value of a home. If your home has 3 bedrooms and all of the recently sold comparable homes have 2 bedrooms, an adjustment would be made to your home value.
Bathrooms: Just like the total number of bedrooms, the total number of bathrooms is an important interior feature of a home. An adjustment should be made within the CMA if a home has 1 more bath then all of the comparable homes. In addition to the total number of bathrooms in a home, the condition of a bathroom is also an important piece of a CMA. A home that has a bathroom that have been renovated in the past few years should have a higher value than a home that has the original.
Kitchen: A kitchen will often sell a home. There are many features within a kitchen that impact a CMA. The type of cabinets (Cherry, Oak, Maple, etc), type of counter tops (Granite, Quartz, Corian, etc), type of back splash, and type of appliances are just a few. When completing a CMA your Realtor needs to weigh the condition of the kitchen when comparing your home to recent comparable sales.
Flooring: The type of flooring a home has will impact the value. There are many different types of flooring such as linoleum, hardwood, ceramic tile, and laminate. A home with a high-end ceramic tiled kitchen floor should have a higher value than a comparable home that has linoleum flooring in a kitchen. Wondering what type of flooring would give the best return on investment (ROI) when the time to sell comes?
Siding: The type of siding from one home to another can make a difference in determining value. A manufactured home with low maintenance vinyl siding will carry more value than a home with aluminum or steel due to the Landlord’s home standards which require a home’s siding be upgraded to vinyl within 12 months of being sold.
Windows: The type of windows in a home is also important when completing a CMA. Windows are important to a home’s energy and often important to a prospective buyer. When completing a CMA, your Realtor® will consider a home that has newer vinyl thermopane windows to have more value than a home with original aluminum windows.
Roof: The roof of a home has one of the highest replacement costs. The year a roof was replaced and whether it was a complete tear-off or not, will be important. A home with a brand new tear-off roof is going to have a higher value than a home that has a 20-year-old roof that will need to be replaced.
Garage/Carport: A garage or a carport are very important exterior features to many potential buyers. Within a CMA, there should be an adjustment made for comparable homes that does not have a garage or carport if your home has one.
Mechanics: The mechanics of a home should also be taken into consideration. The mechanics of a home are items of a home that a buyer will be looking at when considering a home. The age, model, and make of a homes heating system, cooling system (if applicable), hot water heater, and electrical service all play a part in determining the value of a home within a CMA. A home with a 20 year old 80% efficient furnace and a 15 year old 30-gallon hot water heater is going to have less value than a comparable home that has a 2 year old 95% efficient furnace and a tank-less water heater.
A well prepared CMA should be comparing “Apples to Apples” and adjustments made if there are any “Oranges” included in the mix.