Producing an Accurate Comparative Market Analysis (CMA)

Experience and market area knowledge are the key elements required to produce a quality CMA.  If you’re new to the real estate business, or new to the area, seek help. A CMA isn’t just comparative math. A thorough knowledge  of property sales in a specific area is required to make accurate decisions based on  actual sales data and the subject properties amenities.

Carefully Select Comparable Properties (Comps):

When selecting properties that are considered comparable to the subject property, important considerations include:

• From a statistical standpoint, sales to far above or to far below the bulk of the group should be questioned. There are probably valid reasons for the large differences in value.
• Be  sure that you are able to justify your reasons for not using certain comp properties. If you exclude a certain property make sure you have a valid reason for doing so.
• Select comparable properties as near to  the subject property’s area  as possible.
• Only use sold comps that are current. Stay  within 3 to 6 months if possible.
• When the number of comps available for analysis is high,  only use  similar construction types.

 

Adjusting Values for Property Differences:

There are always differences when comparing similar properties. Make  sure to adjust the subject property’s value  for its differences from the comp properties:

• You can add or subtract value for differences in lot  size or the home’s square footage.
• Also adjust for any differences in numbers of  bedrooms, baths, garage spaces, etc.
• Look at the financing differences that may have influenced a sale price. Seller provided financing can result in a higher sold price  that may not be  related to a properties true value.

Include an Analysis of Properties Currently Listed For Sale:

A complete detailed report for your listing prospect won’t be complete without an analysis of currently listed properties competing  with the sale of their home. The  list price recommendation you make can be adjusted  upward or downward depending on the number  of homes  listed in the area and their list prices.

In addition, if you know  that some of the highest sold comps were from periods with very low inventory you might want to amend your recommended list price  downward  if the current market has a  much higher inventory.

Get a Second Opinion:

Most seasoned real estate pros we know get a second opinion before finalizing their CMA.   It’s easy in this fast paced business to overlook some important factor that can drastically raise or lower your recommended list price.  Once you’ve presented the CMA to your client they’ve got a listing figure stuck in their head.   Not only will it destroy your credibility but it’s very difficult to go back and tell them that you’ve made a mistake and the list price really ought be higher or lower.   Second opinions from a respected associate that’s an area expert is highly recommended.

Present Your Market Analysis in an Easy to Understand Format:

There are software solutions for most MLS systems that produce  polished looking reports for CMA’s.  The value to your client is in the data and your interpretation of it.   Don’t get hung up on the presentation’s appearance.   While your presentation  should be professional, make sure that the perceived value of the CMA is the  selection and your expert interpretation of the data.

Related articles

• How to determine your home’s market value with a CMA (friscotxrealestate.wordpress.com)
• Pricing your Property to Sell (choiceofhomes.com)