So, you might hear a real estate agent throw out the term CMA. That’s industry jargon for Comparative Market Analysis. There might be other terms used, like “Maximum Hove Value Audit” or similar. But they all start with the same basic information to help you determine the correct asking price for your home.
What is a comparative market analysis?
A comparative market analysis (CMA) is an evaluation of similar, recently sold homes (called comparables) that are near a home intended to be bought or sold. Comparative market analyses establish the current market value of the home and are prepared by real estate agents. A comparative market analysis is not the same as an appraisal, which is performed by a licensed appraiser.
Depending on the real estate agent, these reports may be extraordinarily detailed or be just a couple of pages of comparable home sales within the region. The objective remains the same: to compare your home to recently sold and active listings in the surrounding area and give you a better idea of your home value.
The first step in conducting a CMA is to analyze your home. Ideally, this should include both objective and subjective elements, such as:
- Square footage
- Number of bedrooms and bathrooms
- Land area
- Number of floors
- Construction age
- A comprehensive list of amenities and features such as swimming pool, fireplace, etc.
- Location, including proximity to major roads, marketplaces, schools, etc.
- Subjective features such as views, design, style, etc.
- Recent improvements, if any.
- Condition (Repairs that are needed, updating done or needs)
A CMA will always consider recently sold homes. It may should consider active, pending and withdrawn listings for an even better idea of prospective value.
1. Recently sold homes: Homes within the same region and with similar size, construction, amenities and location will often sell within the same price range. A long, hard look at recently sold listings will often tell you everything you need to know about your home’s prospective value. In fact, professional appraisers also use these listings to assign a value to a home.
Most agents (and appraisers) only consider sold listings from the past six months or less. Depending on the circumstances, they may expand their analysis to a year if there are very few comparable sales, or reduce it to the last few weeks in busy real estate markets.
2. Active listings: This includes homes currently on the market. Understand that a home still waiting for a buyer represents prospective, not real value. Some sellers have high expectations and list their homes for far higher than their actual value. Others may reduce prices in hope for a quick sale.
Market conditions also affect values of unsold homes. A sellers’ market tends to inflate values, while a buyer’s market tends to deflate values. Therefore, always consider active listings as an adjunct to recently sold home values.
3. Pending listings: This includes recently finalized deals that haven’t fully closed yet. You most likely won’t have access to actual selling price of these listings, but it does give you a general idea of the state of the market at the moment, at least in terms of the number of days a property spends on the market (called ‘DOM’ in realtor parlance).
4. Expired listings: These are listings that expired because they couldn’t find any buyers. Listings mostly expire when prices are too high. If homes similar to yours find their way into the expired listings, it might be an indication that you may have to price your home a bit more aggressively.
Getting Data on Home Pricing Trends
Getting access to MLS data is difficult for the average homeowner, but as a REALTOR® we are able to provide you with a pricing trend analysis for your area or zipcode.
Home Analysis Inputs
1. Square Footage: Square footage and home values don’t necessarily follow a linear relationship. After a certain size, larger homes are actually worth less per square foot than smaller homes. When comparing homes, we ideally want to look at houses that fall within +/- 100-200 square feet of your home size, or a maximum of 10-15% variation.
2. Beds and Baths: Comparables should have the same number of bedrooms and bathrooms, including Half & Three-Quarter baths. We only consider homes with more or less beds/baths when there are not enough comparables to use. Using homes with different values here is truly subjective, as buyers usually search based on what they need. There is no hard and fast rule as to how much an extra bedroom or bath is worth. Only through additional research and agent knowledge of the market can make these subjective adjustments
3. Land Area: Only comparables with similar lot sizes and positioning is used whenever possible. A corner lot on 0.3 acres simply is not comparable to an interior street lot on 0.24 acres, even though they are very close in size. Orientation of the home (facing North, South, etc) can actually affect values as well.
4. Amenities: Amenities such as fireplaces, large garage, landscaping, upgrades, etc can go a long way in increasing home value. We make sure to consider these when comparing homes. Please be aware that swimming pools normally add very little value to a home, and in some cases are a liability.
5. Location: Location, as any REALTOR® would tell you, is one of the biggest factors in determining a home’s value. However, since we are probably only considering sales within the same region, this shouldn’t be a big concern. One factor we do need to look at are whether your comparables face a quiet street or a busy intersection (quiet = higher price), whether the bedrooms face a stunning view or a back alley, and whether schools, marketplaces and public transport are nearby.
6. Construction Age: Construction age plays a big role in determining the price of a home. Older homes tend to have historic value and character, while newer homes are often perceived as bland and boring. At the same time, old homes might require extensive upgrades and renovations, which can be a significant financial drain. Ideally, we only want to consider houses constructed within +/-10 years of your home, especially if the home was constructed after 1950s (since such homes would have little historic value).
7. Upgrades and Renovations, if Any: We make sure to consider all upgrades and renovations while conducting a CMA. A kitchen or bathroom remodel, upgraded energy efficiency items, new siding, etc. can often add a few thousand dollars to your home value.
8. Subjective Features: Buying a home is an emotional decision. Something as simple as a tree in the backyard or a quirky window can make a home appear more charming and desirable. Subjective features such as design, style, landscaping and even color can affect home prices. Even if the comparables don’t have the same subjective features as your home, it is important to include them in your analysis. That is one reason it is so imperative that we visit the home before providing a solid price range value for you to consider.
9. Condition: Homes that have not been updated to recent design trends will tend to sell for less money, as buyers factor in the “updating” costs. Items in need of repairs will also drastically reduce the sale value, as buyers almost always over-inflate the costs to fix or replace items.
Areas That We Inspect During Viist
- Exterior, including
- Curb Appeal, Lawn Condition, Landscaping, Driveway, Parking, Decks & Patios, Roof, Paint, Siding, Brickwork, Doors & Windows, outbuildings, play areas, pet enclosures
- Sinks, Cooktops, Ovens, Countertops, Flooring, Layout, Walls, Dishwasher
- Living Areas
- Layouts, Flooring, Lighting, Window Treatments, Fireplaces, Walls
- Dining Areas
- Layouts, Flooring, Lighting, etc.
- Master Bed & Bath
- Layout, flooring, Lighting, Window Treatments, Countertops, Closet areas, Commode, Tub, Shower, Skylights, Walls
- Other Bedrooms
- Other Baths
- Other Rooms (Florida room, office, bonus rooms, utility rooms, etc.
As you can see, to get a true picture of what your home will sell for in the current market conditions, there are a lot of factors, comparisons and analysis that goes into determining a current fair market value price range. No on-line CMA service can accurately give you a reliable price range at which you should market your home.
In the Oklahoma City Metro area, we provide comprehensive Comparative Market Analysis free of charge. Just give us a call at 405-590-6563