What is the CMA
A Comparative Market Analysis or CMA is a market value estimate of a real property done by a real estate agent when serving their clients. It is not the same as an appraisal which must be conducted by a licensed or certified appraiser. The CMA uses similar valuation techniques that an appraiser would use to determine the value of a property. However, an appraisal is more detailed and accurate.
What goes into a CMA
The purpose of the CMA is to come up with an estimate of the value of the home by comparing the home to others with similar size, features, and location. Three to Five comparable homes are chosen, which are homes sold within 3-6 months, pending homes, expired listings, just listed homes.
A CMA will include the following:
The location: The CMA must choose homes that are in the same area, ideally within a 1-mile radius of your home. Selecting a home that is too far will provide a less accurate estimation since the further you go from your home, the more the market differs.
The description: The number of bedrooms, bathrooms, and rooms, and the year the home was built. If there are any differences in the number of bedrooms or bathrooms for instance, they are taken into account when calculating the estimation.
The size: The square footage of the homes as well as the lot size.
The price range: The price range of each home with differences added or subtracted to match the subject property. As well as the estimate value of the subject home.
Why important
The CMA is used for many reasons. It is used by agents, brokers, sellers, and buyers.
The uses of a CMA are:
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Determining what price to put a home on the market for
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Determining whether the price a seller wants to sell their house for is reasonable
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Estimating the value of the property
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Verifying by a buyer and their agent that the value of the home is similar to the listing price of a seller so that they do not overpay for a house
A CMA is a great tool for both sellers and buyers. It helps both make informed decisions.
For the seller
Prevent overpricing or underpricing the home. The price of the home is a big factor, so it is important to get it right. Getting the price right will more likely attract more buyers, and sell the home fast at a price where you are making money on the home and at the same time not losing money. We do not want to price the house so low that we sell the home fast but for a lower price.
Provide confidence in your price and better negotiating power, you are not hoping to get a certain amount for your home based on what you want but based on what the market is willing to pay for it.
For the buyer
Prevent overpaying for the home. It also helps in negotiating and better understanding the market.
Further Reading
Mass.gov – comparative market analysis
Investopedia – comparative market analysis
Nadia Khan Estates – What is a CMA in real estate
Wellington Home Team – What is a CMA
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