In Real Estate, CMA Is Not an Awards Show for Country Music
Rocket mortgage describes CMA or comparative market analysis as a tool that real estate agents use to estimate the value of a specific property by evaluating similar ones that have recently sold in the same area. It’s mostly used to help sellers set list prices. Sometimes it is used to help buyers make a competitive offer.
It can be difficult to provide an estimation of the fair market value of a specific property because there are a number of things that go into determining that property’s worth. Buyers or sellers may consider things such as location, square footage, and how many bedrooms and bathrooms there are.
However, the age, condition, and lot size of the subject property and other factors like the local and national market conditions will affect the value of the residential real estate as well.
An Experienced Real Estate Agent
If you are selling a home in Babcock Ranch and need a professional comparative market analysis done, then you need a trusted, reliable real estate agent who can get you the most accurate comparative market analysis report prepared.
My name is John Garuti III and I’m a real estate professional who’s best known for my skill and expertise in helping my clients get their homes sold. Click HERE for a meeting link where I will prepare a comparative market analysis for your home in “the Bubble.”
How is a CMA Done?
The comparative market analysis must include a description of comparable properties, aka comps or recently sold homes in the same area that are as similar to the subject property as possible, and information points that inform the fair market value of the house.
Usually, comparable homes are sold within the past three to six months to be considered true comps. The market changes quickly and has a major impact on a property’s value. Buyers are willing to pay more when the market is strong and less when the market is weak.
A real estate agent will find three recently sold homes that are similar properties and are located as close together as possible.
Once the real estate agent has at least three comparable properties, each one is analyzed to see how it differs from the subject property. After the differences are priced out, the sales price of each comparable property is adjusted to determine how much it would cost if it were nearly identical to the subject property and sold in the current market.
Comp Purchase Price Considerations
To provide an accurate CMA, your agent will also look into the specifics of the comps’ sales to see if and how they impacted the purchase prices.
Buyers and the type of financing they obtained can influence home value and so can concessions made by the seller. If the seller offered to pay for closing costs or make repairs to the home prior to closing, the cost of these concessions has to be subtracted from the purchase price of the home to determine its true value.
Challenges of Sellers
It can be challenging to come up with a fair asking price for your home. Of course, you want to price it high enough to see a good return on your investment. You also want to price it low enough to attract potential buyers. Your goal is to maximize profits and still fall into your target buyer’s price range.
To find that price that’s just right, you have to know your home’s worth. Essentially, a home is worth whatever a buyer is willing to pay for it. You won’t know what that is, however, until you price it and put it on the market.
The best comps will be located in the same neighborhood or same subdivision. However, if there aren’t enough recent sales in the local area to complete the comparative market analysis, the real estate agent will select comps located in an area considered similar due to the quality of local schools, crime rate, noise level, proximity to amenities and so on.
Challenges of Buyers
As we mentioned before, although a comparative market analysis is most often used to assist sellers with coming up with that perfect listing price, it can also be used to help buyers put in competitive offers.
Or, say the home that the buyer is interested in seems overpriced. A real estate agent can use a CMA as evidence that the listed home is worth less than the listing price.
Although a comparative market analysis can be a helpful tool in negotiating, if a buyer is trying to purchase a home in a seller’s market, they may struggle no matter what the report finds.
What Does a CMA Report Include?
Once a real estate agent performs comparative market analysis, they will create a report detailing their findings. That report will typically include:
- Address of the subject property and three to five comparable properties
- A description of each property, including elevation, floor plan and the number of bedrooms and bathrooms
- Square footage of each property
- What each comparable property sold for
- Dollar adjustments for any differences
- The adjusted sold price per square foot of each comp
- The fair market value of subject property
- Sold date
- Terms of financing and sale
- Special features like swimming pool, finished basement, fireplace, patio, garage, etc.
While there is no standardized comparative market analysis report, some real estate agents will generate a comprehensive and professional-looking report.
Comparing Locations: What to Consider
- The desirability of a neighborhood: The more sought after the neighborhood is, the more valuable the home will be. The home’s location within the neighborhood can even make a difference in its price.
- School district: The quality of public schools within the same school district will also weigh in on the home’s value. Districts with higher test scores and graduation rates and lower student-to-teacher ratios are typically worth more.
- Crime rate: Areas with lower crime rates are considered safer and, therefore, more valuable.
- Privacy and noise level: People tend to prefer to live in peace and quiet. Homes that are away from noise and traffic are considered more valuable. A home near a highway, an active train track, or an airport will have less value than homes tucked away on quiet roads.
Comparing Homes: What to Consider
- Lot size: The amount of land the subject property sits on might greatly impact its worth. Just a quarter of an acre can make a huge difference in value.
- Square footage: As you’d probably guess, larger homes are usually worth more than smaller ones.
- Number of bedrooms and bathrooms: A house with more bedrooms and bathrooms is usually priced higher than one with fewer.
- Age and condition of the property: To determine a home’s value, you need to know when it was built and its current condition. Newly constructed or recently renovated homes will have more value than older houses that haven’t been updated in a while. At the same time, historical homes can be of higher value than recent constructions if they’ve been restored and regularly maintained.
- Special features: Home amenities like finished basements, garages, swimming pools and fireplaces can increase a home’s value.
What if There are No Recently Sold Comps?
If a home is located in a rural area that has seen few sales in recent years or maybe a home is listed when the economy takes a sudden nosedive – these things can prove to be extremely challenging in finding reliable comps. A home may also be so unique that it is impossible to find one similar to it.
In this instance, when there haven’t been enough sales to run a comparative market analysis, your realtor will look at:
- active listings – give you an idea of the current competition
- pending listings – provide a better indication of value because they have accepted offers
- expired listings – help give insight into the prices that buyers felt were too high
Can I Do My Own CMA?
Much of the information you need to perform a CMA is public data and/or can be found by surfing the internet, so technically speaking, there’s nothing stopping you from trying.
But if you want an accurate CMA, it’s the specific market knowledge and expertise that a realtor such as myself possesses that will make your CMA a reliable determination of a home’s value.
Without that knowledge and experience, it will be challenging to properly select, evaluate and adjust comps.
CMA vs. Appraisal
The main differences between comparative market analysis and an appraisal are the people involved, the reason for their involvement and the process by which they come up with an appraised value or current market value.
An appraisal is conducted by a licensed appraiser on behalf of a bank. A comparative market analysis CMA is conducted by a real estate professional. The appraiser has no vested interest in the sale of the home and is there only to ensure the bank isn’t lending more money than necessary.
A comparative market analysis has a sales comparison approach with the report including:
- recently sold comparable sales
- active listings
- pending listings
- expired listings
This information helps to determine where the market is trending, what the current list to sales price ratio is as well as what sellers can expect to get for their home if they were to list in the current market.
Appraisals generally only use closed sales to arrive at value.
Comparative Market Analysis Example
Jonathan and his wife Antoinette have recently decided to sell their family home in Babcock Ranch and move north to be closer to their children and grandchildren.
They purchased the home for $400,000. Over a few years, there had been significant upgrades to the flooring, appliances and a built-in pool deck and patio.
They know they want to sell for more than what they bought it for and make a good profit, but they’re not sure what their listing price should be.
Finding an Experienced Agent
Antoinette googles real estate agents babcock ranch and finds JG3 Homes. With just the click of a button she’s easily able to connect with me, an experienced real estate agent who gives her and Jonathan a one-hour in-person consultation where I’ll provide them with a professional comparative market analysis for their home.
Virtual Consultation and Gathering Information
I gather the information about the upgrades listed above as well as:
- The home sits on three-quarters of an acre lot in a subdivision of homes built around the same time and with similar floor plans.
- It has four bedrooms, and two and a half bathrooms.
- It is a 2,800 square feet home that is in good condition with no major repairs needed.
CMA Compares Recently Sold Comps
After compiling a list of three comps and their differences from the subject property, I will get a cost breakdown of how each difference will affect the home’s overall value.
Each comp’s sales price will then be adjusted to reflect how much it would’ve sold for had it been nearly identical to Jonathan and Antoinette’s home.
More desirable features (i.e. swimming pools) are deducted from the sales price of the comp when adjusting the price. Less desirable features are added to it. I will then calculate total adjustments for each comp and adjust sale prices accordingly.
When I do this, the range reflected by the adjusted sale prices of the comps will give Antoinette and Jonathan a good starting point of where their listing price should fall in.
Process of Reconciliation
I will then use the process of reconciliation to help the couple determine what the home’s price should exactly be.
In reconciliation, the real estate agent measures each comp based on how similar it is to the subject property. The comp with the most adjustments is given the lowest weight. The comp with the fewest adjustments is given the highest weight.
The adjusted prices are then multiplied by the weighted value and the results are added together to determine the best list price.
Not only is the CMA a helpful tool, but, after employing me as their listing agent, Jonathan and Antoinette are able to sell their home quickly and make an almost $200,000 profit!
Schedule Your Virtual Consultation Today
If you are looking to sell your home or investment property located in the Babcock Ranch community, see me for your virtual seller’s consultation today. Not only will I conduct a comparative market analysis for your home, but when you enlist my services I will provide you with a free copy of my marketing plan!
With the use of my highly effective marketing plan, I’ve formulated a crucial tool that not only walks my clients through the process of how to make their homes more marketable but also offers my team’s expert guidance and assistance in promoting and sharing the client’s home on all available platforms in order to reach the broadest yet most targeted audience.
With the help of an accurate CMA report and my additional assistance through my marketing plan, you will have all the tools you need to not only price your home appropriately but get it sold quickly! Click HERE to get started with your complimentary consultation.