How Home Sellers Can Benefit from a Comparative Market Analysis
The best method available to home sellers to learn their home's current value so they can select the best sale price is a CMA.
Everyone who has ever sold a car knows they have to first find out how much it is worth and what people are willing to pay for it. It's easy to gather the information you need to set a price from newspapers, Kelly Blue Book, or online used car sales sites. When you've gathered this information you can then set a price that potential buyers will find attractive. It's really pretty simple and requires very little pricing expertise.
If you want to sell your home, it's not so easy and it's certainly not simple. The value of your home is much more difficult to predict and the information available to home sellers can be untrustworthy. Online home valuation sites are fun to play with, but they are based on past sales, not current market factors. Newspaper listings give you some information, but houses are usually so different that it's hard to compare.
The best method available to home sellers to learn their home's current value so they can select the best sale price is a CMA, or Comparative Market Analysis.
CMA is the term real estate agents use when they conduct an in-depth analysis of a home's worth in today's market.
What Is a Comparative Market Analysis?
A comparative market analysis is a tool real estate agents use to set a fair selling price for a certain property under current market conditions. The realtor will search for three similar properties in the same neighborhood as the subject property to determine what a house will sell for at that moment in time. Realtors typically use the following four metrics to set the fair market asking price.
The houses used in the analysis should be from the same neighborhood, as values can fluctuate widely in a gentrifying neighborhood compared to a stable one. Again, the Realtor needs to look at the sale prices of properties sold as recently as possible in the neighborhood, usually within the past three to six months, to measure the growth or decline of property values.
Size of Lot
Homes sitting on large lots generally have a higher value than ones on small lots with limited room. If the property the Realtor is trying to set a price for sits on an acre of land, they will look for homes with as close to an acre of land as possible.
Livable Square Footage
Livable square footage is space that can be easily used during daily living activities. A home with more square feet of livable space also has a higher value than those with limited space. The real estate agent will want to compare houses of similar size.
Property’s Condition and Age
As properties age, they tend to need a lot of maintenance work versus a newly built home. The Realtor will compare properties of similar age to consider the additional maintenance costs one can expect to address once they take over ownership.
In addition to the four basic metrics, real estate professionals performing a CMA will also search for homes with special features and characteristics that match the house they are trying to set a listing price for.
When should I ask for a CMA?
If you don't get a CMA before you list your home you might try to sell it for the wrong price. Setting the price too low means you'll get less money for your home; setting it too high means it might not sell at all. Your Del-co Realty agent will want to complete a CMA on your home before helping you sell it - it is standard practice across the country.
How is a CMA prepared?
First, your Del-co Realty agent will walk through your home. The home does not have to be in perfect condition. However, property condition does affect price, so if you plan to do work on the property, let the agent know. At this point the agent may recommend improvements to increase your home's value.
Second, we will research information about comparable properties in the area, usually using a real estate industry resource called the Multiple Listing Service (MLS). This includes:
- Properties that have sold and closed within the last 12 months
- Active listings - properties currently for sale
- Pending sales - listings that have sold but not yet closed
- Expired listings - properties that did not sell during the listing period
- Location - location of recent sales of comparable homes in same or similar area
Lastly, your Del-co Realty agent will suggest a probable selling price. Don't be surprised if a CMA results in a price range rather than a set price, particularly in markets were there are price differences due to property size, age, architectural style or physical condition.
What can you expect to see in a CMA?
A completed CMA is presented in the form of a report, which includes the selling price, detailed information about your home, and the comparable properties that were researched to determine its value. Because the price derived from a CMA is somewhat subjective, your agent may include brief statements on the perceived selling points your home.
A CMA is NOT an appraisal.
A real estate appraisal is a comprehensive evaluation performed by an independent professional appraiser. With a CMA, an agent's experience in the business and familiarity with the local area can affect the accuracy. Typically, a CMA prepared by an experienced Del-co Realty agent with good knowledge of the local market is right in line with your home's appraised value. A CMA can therefore be a very useful tool in a real estate transaction.
When selling your car, an incorrect price might cost you a few hundred dollars. If you set the wrong price for your home, you could lose tens of thousands of dollars. Do your homework and ask a Del-co real estate professional for a Comparative Market Analysis (CMA) to ensure you get the most value for your home.