At its core, real estate is all about valuing properties. Sellers want to list their home for as high as possible, and buyers want to get a great deal on a property that will only go up in value.
So if it all comes down to value, how can we gauge property value without paying for an extensive appraisal?
I’d like to introduce you to the Comparable Market Analysis, or CMA as you’ll commonly hear it called. CMAs are professionally generated value estimates based on hard facts of home sale data – not speculation or subjective guessing. It follows a particular format and structure that is similar – but not identical to – a more intensive paid appraisal that banks or lenders conduct.
CMAs have a lot of utility for both buyers and sellers. For sellers, it's the first step to getting a realistic range of what price your house may sell for in today's current marketplace. It’s important to note that it’s not a definitive “answer” as to what your home is worth, but a possible range depending on certain tangible variables. With a CMA, homeowners can see a general range of what their home is worth and also gauge the competition if they decide to sell.
For buyers who are interested in a property, a CMA gives them access to hard data for which they can base their price if they decide to write a purchase offer. It also confirms or double checks if the listing price the seller chose is accurate, realistic, and fair in today’s rapidly evolving buying and selling environment.
But if you’ve ever received a CMA – possibly in an email from your Realtor – it might just look like a lot of data and numbers at first glance. So let’s dissect the parts of a CMA one by one and explain how to read it properly.
Here’s what you’ll see in a CMA:
-On the cover of the CMA, you’ll see the subject property address listed along with an overhead photo of the dwelling and its surrounding neighborhood from GoogleEarth.
Where do these properties come from and why were they chosen for this CMA? The real estate agent that produces this CMA for you hand selects properties that they think are similar to the house we’re trying to value. That means we’re comparing single family residence to the same, condo to a condo, etc. and not comparing a halfplex to a duplex, etc.
Ideally, the properties in the CMA that we’re comparing to have sold recently – usually with 6 months or less as a rough parameter. The more recent the home that sold (or is pending or listed, etc.), the more relevant that price will be for comparison purposes.
Likewise, we want to compare the subject property to homes that are in the same neighborhood, as the price for the same 2-bedroom, 1-bath, 1,000 sq ft. structure could either be dirt cheap or sky high depending on the quality of the neighborhood. So to be as accurate as possible, we want to compare to homes that are in the same area, usually within half a mile or so, with most credence given to the homes that are on the same street or closest.
It's important to note that this isn't a perfect science. Sometimes, there are dozens of comparable properties to choose from that are right on the same street and have sold within a couple of months. Other times, you may have to go a mile or two out and further back in time to find enough similar listings for an accurate CMA.
But what we don’t do is “cherry pick” certain properties just to justify a higher or lower price – that doesn’t do the buyer or seller any good and just wastes everyone’s time because the results will be skewed.
-You’ll see a Map Of All Listings which displays pins on all of the listings the CMA is based on (properties as similar as possible to the subject property.) These will be color coded as active, pending, or sold listings.
-The Summary of Comparable Properties then breaks down those properties, grouped by active, pending and sold listings. Of course, sold listings hold more weight when factoring a CMA because their sold price is a matter of fact, where pending listings might sell for less. Since anyone can list their home for any price, active listings bare the least influence on the CMA.
In this Summary of Comparable Properties, data like the number of bedrooms, bathrooms, year built, square footage, list/sold price and sold date are all documented for each property.
-In the next section, a full CMA will go into further detail in an expanded view of each property with more information like year it was built, the lot size, photos, and agent remarks that are useful for understanding repairs that need to be made, upgrades that could boost the value, whether it’s a rental property, and many other comments.
-Comparable Property Statistics
Now we’re getting into the portion of the CMA that gauges the hard data of the subject property lined up with our chosen comparable properties.
For each of Sold, Pending, and Active listings, the lowest, highest, and average price will be documented, as well as the average Days On Market. This information will be displayed as a bar graph and then also charts.
So now you have a thorough statistical analysis of your subject property compared to sold, pending, and active listings that are in the same neighborhood and approximately the same size, type, bedroom and bath composition, etc.
You know which listed homes sat on market for a long time before selling, and which were snatched up by eager buyers and sold quickly.
With all of this data displayed in several different forms side-by-side, you can easily judge you’re the subject home’s potential value based on a tight range, no matter if you’re selling your home or looking to buy one and want to make sure the price is fair.
Do you still have more questions about CMA's or your home's value? Contact us!