What is a comparative
Market Analysis?
How real estate agents price homes: Comparative Market Analysis
A comparative market analysis (CMA) is a report that compares the sales prices of similar properties in the same area to determine the value of a specific property. CMAs are typically prepared by real estate agents or brokers in order to assist homeowners in setting a price for their home when selling or to help buyers determine the fair market value of a property they are interested in purchasing.
To create a CMA, the following steps are typically followed:
Identify the subject property:
The first step is to gather all necessary information about the property being analyzed, including its location, size, age, condition, and features.
Select comparable properties:
The next step is to select a group of similar properties in the same area that have recently sold or are currently on the market. These properties, known as “comps,” should be as similar as possible to the subject property in terms of size, location, and features.
Gather data on comparable properties:
Once the comps have been selected, the next step is to gather data on each one, including the sales price, date of sale, and any additional details about the property.
Analyze the data:
Once all of the data has been collected, the CMA will analyze the sales prices of the comps and make adjustments based on any differences between the comps and the subject property. For example, if the subject property has a larger yard or an updated kitchen, the CMA will adjust the sales price accordingly.
Determine the value of the subject property:
After analyzing the data, the CMA will provide an estimated value for the subject property based on the sales prices of the comparable properties. This value is known as the “market value” of the property.
Timeframe:
The time period over which the comparable properties were sold or are currently on the market is an important factor to consider when creating a CMA. In general, the more recent the sales, the more relevant they will be to determining the current value of the subject property.
Location:
The location of the subject property and the comparable properties is crucial to the accuracy of the CMA. It’s important to consider the proximity of the properties to each other and to any local amenities or features that may impact their value.
Condition:
The condition of the subject property and the comparable properties should be taken into account when creating a CMA. If the subject property is in significantly better or worse condition than the comps, this should be reflected in the final value estimate.
Other factors:
In addition to the size, location, and condition of the properties, there are many other factors that can impact their value. These might include the type of property (single-family home, condo, etc.), the style of the property (modern, traditional, etc.), and the level of upgrades or renovations.
Professional expertise:
It’s important to note that a CMA should be prepared by a professional real estate agent or broker who has a thorough understanding of the local real estate market and the factors that can impact a property’s value. This ensures that the CMA is accurate and reliable.