A CMA in real estate helps you set a reasonable expectation from your property’s sale. It might be challenging to determine your home’s current value, but the best and most popular method is to do a comparative market analysis.
What is a Comparative Market Analysis (CMA) in Real Estate?
Comparative market analysis in real estate are carried out by real estate agents to examine the elements that influence both purchasing and selling in the housing market.
It is typically used to compare the market worth of a property to those that are similar. Factors like area, size, and number of bedrooms and bathrooms determine the value of the residential real estate.
It includes the property’s age, condition, features, lot size, and so forth, as well as the situation of the local and national housing markets.
To assist sellers in setting listing prices for their properties and assist buyers in making competitive offers, real estate agents and brokers produce CMA reports.
Also, you can conduct your own comparative market analysis by looking for similar properties.
Key Takeaways
- An assessment of a home’s value known as a comparative market analysis (CMA) is used by sellers to set listing prices and by purchasers to make competitive bids.
- The analysis takes notes of the property’s location, age, size, structure, style, condition, and other elements, as well as comparable properties.
- Preparing CMA reports can also be done with the help of real estate agents or brokers. Sellers and buyers can do their own research online.
CMA Vs Appraisal
The biggest difference between an appraisal and real estate CMA is the people involved. As opposed to a real estate agent who performs a CMA, a licensed appraiser works on behalf of the bank to complete an appraisal.
The bank will request a property appraisal as soon as a prospective buyer applies for a loan to acquire the property.
While using the same method of comparison, appraisers do not have the same financial stake in the sale of the property as real estate salespeople do.
During the appraiser’s visit, it’s necessary to ensure that the property’s market value is reasonable enough to prevent the bank from paying more than is necessary.
How to do a CMA for Real Estate?
Step 1: Examine Your Neighborhood
Buyers will mostly, look out for a healthy environment. School proximity, amenities, and other facilities are necessary for lifestyle.
Having a CMA real estate report will help to decide whether the property meets the buyer’s expectations.
Determine the locality’s general quality and the most and least attractive spots. Look at where it is in relation to parks, school areas, and other facilities.
Step 2: Gather Information about the Property
It makes it easier for the Broker or Agent to make a CMA report with an existing listing home as it can be examined in person to gather information about the property.
The CMA report should contain notes that are very important in terms of property features like the number of bathrooms, and bedrooms, condition of roofs, basement, and size of the property.
Step 3: Rum Comps
Closer to the property, find some comparable properties which are sold recently in nearby areas. The comparable property should be in the same location.
The comparable property will have almost similar features in terms of bedrooms, and bathrooms. The square foot and construction are the most important factors of the property that should be kept in consideration.
Keep track of the updated sale of the comparable property, it helps you to get an idea about fluctuating market prices.
There can also be some price differences as the residential areas can be different from each other for example some properties can be located in quiet areas whereas some can be located near highway roads where traffic noises can affect them.
Hence, these are some of the factors that affect the price level in the market.
Step 4: Cost Adjustments
The next step would be adjusting for variances between the home and each comparable property.
Each of the discrepancies can be given a price by a knowledgeable real estate agent or broker, who will then alter the value of each comparable.
Despite what would appear illogical, if the comp has a better feature than the competitor, the price of the competitor is increased, and vice versa.
Step 5: Determine the Price Per Square Foot
Divide the adjusted price of each comparable by its square footage after adjusting for differences to get the sales price per square foot.
The average can then be calculated by adding the sold prices per square foot of all the comparable properties and dividing by the total number of comparable properties.
Finally, to get the price of the property, multiply this average by the square footage.
What Does a CMA Report Look Like?
| Subject Property | Property 1 | Property 2 | Property 3 | |
| Cost of sale | 5,50,000 | 4,00,000 | 4,75,000 | |
| Date of sale | 2 months ago | 4 months ago | 6 months ago | |
| Square footage | 3,000 | 2,700 | 2,500 | 2,000 |
| Bedrooms | 3 | 2 | 4 | 3 |
| Bathrooms | 2 | 1 | 3 | 2 |
| Lot size | 1 acre | 1 acre | .5 acre | 1 acre |
| Garage | 1 car | 1 car | 2 car | 2 car |
| Condition | new | new | old | new |
| Basement | Finished | Unfinished | Unfinished | Unfinished |
| Other features | – | fire place | – | fire place |
Having a detailed list of the distinction between the subject property and the comparable properties, the agent approaches a contractor to obtain an estimate of the expenses associated with each feature in order to assess how each distinction affects the overall worth of the home.
Importance of Comparative Market Analysis Real Estate
CMA is one of the most important tools for determining the value of real estate. A real estate market analysis will assist you in choosing an acceptable asking price for your property based on the sales prices that comparable properties in your neighborhood have achieved on the market.
If you are prepared to buy a new house, a CMA can also help you in negotiating asking prices and creating competitive offers.
Conclusion
The comps that are most similar to the house, more recently sold, and require the fewest revisions are often the best ones. The final pricing may need to be slightly adjusted depending on how the market is performing.
The price might be slightly higher, for instance, if demand is high or supply is low. In contrast, if there are numerous comparable properties for sale, the price could need to decrease to maintain a competitive advantage.
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Frequently Asked Questions
1. What is CMA in real estate?
Comparative Market analysis is a report done by real estate agents or brokers to get an estimated price of your property with a comparison to recently sold property with similar features.
2. Can i do my own comparative market analysis?
Yes, you can do CMA with 5 essential steps- Examine your nearby area, gather information of the property, keep the track of sold similar properties and comp analysis, cost adjustments and prices of per square foot. If you are well researched for these steps you can surely do CMA report for your own home.
3. Who can prepare a CMA?
A real estate agent or a broker can create a CMA report for real estate.
Also Read
- Real Estate Market: Will the American housing market crash?
- Best Time to Sell a House: Selling your house in the right month will fetch you higher returns and ensure you sell quickly. Read our blog to discover the best month to sell your home.
- For Sale By Owner Websites: It will help you list and sell a house by owner in America and save thousands in listing agent commission.
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