What Is a Comparative Market Analysis?

A comparative market analysis (CMA) is an essential tool in real estate that estimates a home's price based on recently sold, similar properties (also called “comps”) in the immediate area. It helps sellers set competitive listing prices and assists buyers in making informed offers. CMA reports are typically created by 澳洲幸运5官方开奖结果体彩网:real estate agents or brokers, but buyers and selle༺rs can also conduct their own꧋ analysis using real estate listing websites like Realtor.com.

Understanding a Comparative Market Analysis

A comparative market analysis (CMA) provides an estimated price for a home by comparing it to similar homes in the area that have recently sold. This helps sellers pick an optimal price that will not result in underpricing or leaving the home unsold due to overpricing. For buyers, it verifies if a home is priced appropriately and൲ competitively and helps in making a fair offer.

A CMA compares a property to other homes similar in location, size, and features. Ideally, a CMA uses recently sold homes from the same subdivision. Of course, finding homes that sold within the last three to six months in the immediate area can be difficult if you're in a low-volume or rural real estate market. In these cases, a 澳洲幸运5官方开奖结果体彩网:formal appraisal might be a better option.

A comparative market analysis is a price estimate, so 澳洲幸运5官方开奖结果体彩网:real estate agents and brokers don't need an appraiser's license to perꦬform a CMA ൩while serving clients.

What's in a CMA Report?

When a real estate agent or broker conducts a comparative market analysis, they will create a report that details the findings. There's no standardized CMA report; however, it's important to note that some states have statutes that require specific information be included in CMAs.

A CMA typically includes:

• The address of the property and three to five 澳洲幸运5官方开奖结果体彩网:comparables
• A description of each property, including elevation, floor plan, and the number of bedrooms and bathrooms
• The square footage of each property
• The sales price of each comp
• Dollar adjustments for any differences
• The adjusted sold price per square foot of each comp
• A reasonable price range for the property

CMA vs. Appraisal

A CMA is completed by a real estate agent, the seller, or the buyer using comparable homes to 澳洲幸运5官方开奖结果体彩网:estimate a price. This esti൲mated price can then be used for negotiating a sales price.

An appraisal requires a state-licensed and certified appraiser. The 澳洲幸运5官方开奖结果体彩网:appraiser compares homes similar in size, layout, and location. Then, they evaluate housing market conditions and generate a report with the home's 澳洲幸运5官方开奖结果体彩网:market value. The 💦appraisal value is♑ used by lenders to establish the amount a buyer is approved for.

How to Do a Comparative Market Analysis

A CMA involves much more than just comparing the prices of recently sold homes in the area. Here's a rundown of the basic steps for creating an accurate CMA:

1. Evaluate the Neighborhood

To set the right listing price—or ensure a home you're interested in is a good deal—the CMA should consider the neighborhood's general quality. For example, it should consider the more attractive blocks and address community amenities, nuisances, and HOA rules. Equally important for inclusion are school proximity and 澳洲幸运5官方开奖结果体彩网:curb appeal.

2. Gather Details About the Property

If a real estate agent or broker does the CMA, they will review the existing listing (if there is one) and make an in-person visit to gather information about the home. They'll take note of the home's size (particularly the liveable space), age, style, construction, condition, layout, finishes, landscaping, upgrades, and updates. 

3. Select Comps

Find three to five comparable homes in the area that have sold recently, as close to the home as possible. Ideally, the comps will be within one mile of the property and in the same school district. Focus on similar houses in terms of square footage, lot size, bedrooms, bathrooms, and type of construction. Pay close attention to when the comparable property sold: The more recent, the b💞etter—real estate prices can fluctuate rapidly.

4. Adjust for Differences

The next step is to adjust for differences between the home and each comparable property. An experienced real estate agent or broker can assign a price to each of the differences and adjust the price of each comp accordingly. It may seem counter-intuitive, but if the comp has an inferior featꦺure, a positive adjustment is made to the price of the comp, and vice versa.

For example, if a comp has an extra bedroom (a superior feature), it is reasonable to assume that the buyer paid more to get the extra bedroom. In this case, you would deduct an amount from the comp to account for the extra bedroom, thereby allowing an apples-to-apples comparison. The🦹refore, the price of the target home is never adjusted.

5𓄧. Determine the Price Per Square Foot After Adjustments

After adjusting for differences, divide the adjusted price of each comp by its square footage to determine the sold price per s💝quare foot. Next, add the sold price per square foot of all the comps, and divide by the number of comps to get the average. Finally, multip✃ly this average by the square feet of the property to estimate its price.

Example of a Comparative Market Analysis

Many real estate agents and brokers use software to generate comprehensive (and professional-looking) CMA reports. If you plan to create your own, use a spreadsheet to keep track of your research, or try an online home-price tool offered by one of the 澳洲幸运5官方开奖结果体彩网:real estate listing websites. Below is an example of a CMA report.

The Bottom Line

In general, the best comps are the ones that are the most similar to the home, more recently sold, with the fewest adjustments required. Depending on the market, the 🧔final price might need to be tweaked slightly. For example, if the market is hot or inventory is low, the price might be slightly higher. Conversely𝓀, if there are many similar homes on the market, the price might have to come down to be competitive.