4 min read Oct 25, 2022

What is a Market Analysis in Real Estate?

What is a Market Analysis in Real Estate?

Market research is the first step that any investor must take before entering the market. A real estate market analysis is a tool that assists us in gathering information to determine whether we should invest in a property or not.

A real estate agent is not always required to understand the market.

While hiring a real estate agent to conduct a market analysis has some advantages, it also has some significant disadvantages.

For example, the agent may lack the extensive experience and specialized training to work with landlords. Alternatively, the real estate agent may be so preoccupied with day-to-day market activities that they cannot see the big picture that real estate investors rely on for success.

What is a Market Analysis in Real Estate?

A real estate market analysis, also known as comparative market analysis, is an examination of current market values for properties similar to the one you want to buy or sell.

A real estate market analysis should always be performed, whether buying or selling a property, as it will assist in understanding the current market, how much comparable properties are worth, if it is an investment property, how much you can charge for rent, and so on.

How to do Real Estate Market Analysis?

A comparative market analysis is another name for a real estate market analysis (CMA). It is essentially an analysis of current market values of properties comparable to the one you want to buy or sell. A CMA is a useful tool for determining the market value of your property, particularly if you are attempting to determine an accurate selling price before listing.

Steps to do a Real Estate Market Analysis

Step 1 – Property Analysis

The first real estate market analysis step is to conduct a property analysis. The following characteristics must be assessed:

  • Area and Neighborhood
  • Size or square footage
  • Lot size
  • Number of bedrooms and bathrooms
  • Other rooms
  • Number of floors
  • Construction age
  • Amenities and features
  • Proximity to local amenities
  • Recent or notable improvements

Step 2: Determine the Original Listing Price

After you’ve completed the property analysis, look for the original listing online, if possible. This will give you a good idea of the home’s overall condition.

Step 3 – Examine Property Estimates

Use online resources such as Zillow Zestimates to determine the home’s estimated market value. Because these are market value estimates may not be completely accurate, especially if the home has been modified.

Step 4 – Look for Comparable Properties

The next step is to look for comparable properties to yours. Comparable properties should have the same number of bedrooms and bathrooms, be within 300 square feet in size, be in the same neighborhood, have a comparable lot size, the age of the home, and have comparable features.

Step 5: Determine the Market Value

If possible, there is no better way to accurately price a home than to inspect it in person. Take note of the following factors when walking through the property: overall condition, any additions or upgrades, amenities, features, necessary upgrades or repairs, and the exterior and landscaping.
Based on your research, you should know how much your property is worth.

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