Comparative Market Analysis: CMA Explained

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Jan 4, 2023

Whether you are in the market to buy a new home or are looking to sell your current one, it is important to figure out how much money you should offer or ask for. However, a home’s worth is often subjective from person to person and from home to home as there are many factors that go into pricing it.

For someone without much real estate knowledge, determining this number can be incredibly difficult. Luckily, a comparative market analysis can help you out. Here is an easy overview on comparative market analysis, what all is involved, and why it is so important.

What is a CMA in Real Estate?

A comparative market analysis (CMA) is a tool used by real estate agents to help estimate the value of a property. This is done by evaluating the sale price of similar properties in the same area. When considering factors that impact the value of a home, most people consider things like location, square footage, and the number of bedrooms and bathrooms. But there are also other important factors like the property’s age, condition, features, lot size, and local market that are equally as important consider in the equation.

Because there are so many significant factors that go into estimating the fair market value of a home, this process can be extremely difficult for the average person to do accurately. That is why a comparative market analysis is most often done by a real estate professional who is familiar with the local market. With a CMA report, buyers can have a good estimate of how much money they should offer and sellers can understand how much their home is worth.

It’s important to note that while homeowners often rely on CMA’s, banks and investors often rely on a broker price opinion – which is similar to a CMA but more sophisticated. A BPO, or broker price opinion is a value estimate that is calculated by a real estate broker to help a potential borrower or lender know how much to pay for a property. A BPO often requires more analysis versus a CMA but is more efficient than a formal appraisal.

Who Should Get a Comparative Market Analysis?

Sellers: Nobody wants to sell their home for less than what it is actually worth. CMA’s are an incredibly useful tool for home sellers. In today’s market, seller’s want to price their home as competitively as possible. A CMA will provide them with the most accurate estimate of their home value and give them a better idea of your potential net proceeds in a sale.

Buyers: CMA’s aren’t just for those looking to sell. Knowing a home’s estimated market value can help home buyers submit a more competitive offer. In today’s competitive market, this is important. Additionally, CMA’s can also help sellers stay on budget, as well as protect them from offering too much or too little on a home.

Investors: The whole point of investing in real estate is to make a profit from your property. To do this, investors need to make sure all the numbers are right. CMA’s can help investors evaluate the price of these properties and even protect them from making a bad investment. Investors can also use a properties CMA report to negotiate price with sellers and come out with more money.

Refinancers: You don’t have to be selling or buying a property to get a CMA. In fact, CMA’s are incredibly powerful tools for homeowners too. Having a recent or accurate home valuation can give homeowners a good idea as to whether or not their home value is at a place where they can refinance their mortgage.

What Goes Into a Comparable Market Analysis

Essentially, a comparative market analysis begins by compiling a list of at least three or more similar properties that have sold in the area within the past 3-6 months. This range of months provides the best reflection of the market. From there, a realtor will go through a variety of components to determine an estimated value. These include:

  • LocationLocation plays a huge role in comparable market analysis. Higher value is placed onto properties in neighborhoods where there are quality schools, low crime rate, close proximity to amenities and so on.
  • Square footage- The more livable square footage that a home has, the more valuable it will be.
  • Number of bedrooms and bathrooms- Similar to square footage, more bedrooms and bathrooms generally increases a home’s value.
  • Lot size- Even a half acre can make a huge impact on a home’s market value.
  • Age and condition- The year the home was built impacts its value. Older homes are oftentimes not in the best condition. However, an older home that is well maintained or renovated can have just as high of value as a quality-built new construction home.
  • Home features- There are several specialty home features many look for in a home. These include fireplaces, outdoor living areas, swimming pools, finished basements, garages, energy efficient appliances, owner’s suite on main, kitchen islands, walk-in closet, and much more. Depending on the market and what is popular, having these features can easily increase a home’s value.

How Accurate is a Comparable Market Analysis?

At the end of the day, a CMA is really only as accurate as the most recent sales data that is available. If no homes have sold recently, acquiring an accurate home value is impossible. Of course, the real estate agent that creates the CMA also impacts the accuracy of your CMA.

A real estate agent that is very experienced is more likely to be committed to providing a highly accurate valuation. They will understand the local market well and know just the right comparables to use. They will also pay close attention to every detail that is pulled from records, as well as fact check it for complete accuracy.

Is Competitive Market Analysis Necessary?

While a comparative market is not necessary, it is definitely in the best interest for anyone looking to buy, sell, invest, or refinance a home. Having a CMA will help you to determine an accurate asking price for your home, help you in negotiating offers that roll in, and even help you put up a competitive offer when it comes time for you to buy. If you want to have the most success in your real estate transaction, a CMA is something you will want to have.

The best part about a competitive market analysis is that they are  free through your real estate agent. Why skip out on a CMA, or attempt to do it yourself, when your real estate agent can provide you with an accurate and detailed report free of charge? If you are a buyer, seller or investor in need of a CMA, let SimpleShowing help you out with a free home valuation. Let us know how we can help you on your real estate journey!

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