Uncategorized October 22, 2014

CMA – Comparative Market Analysis

Question:  Can you help me to understand what a CMA is?   What questions I should ask to make sure we fully understand how this may help as we get ready to put our home on the market?

Answer:  CMA stands for “Comparative Market Analysis”.  All three words are important and must be used in conjunction with each other to be useful in determining the value of your home.

When a homeowner or investor first considers selling their home, the initial question is at what price?  To best determine that, a competent and experience Real Estate Broker will do a CMA.  First the agent must collect data on the subject home, usually from the County records with input from the home owner.  Next the Broker will find “Comparable” homes that are currently for sale or have sold recently using the Multiple Listing Service, (MLS).  This is where the competence issue comes in.  Even though each home is unique, there are comparable homes, sometimes many…sometimes just a few.

There are obvious things about a home that we can compare; age of the home, size, (in Sq. Ft.), beds/baths, size of the land parcel and its utility, neighborhood and its amenities and of course location.  More difficult to determine, but just as critical are; quality of construction, materials used, potential future obsolescence and geological hazards, school districts, views and of other improvements made to the estate like shops & outbuildings, pools, landscaping and estimated costs of deferred maintenance, if any.

Now we come to the “Analysis” part.  The subject property has dollar value is either added to or subtracted from it as it is compared to the select other homes.  This can be a lengthy process, depending on the availability of comparable homes and how closely related they are.  For example, if the subject property has more square footage, dollars are added, if the subject has a poorer view, dollars are subtracted, etc…

Clearly experience and competence are critical to this process.  If you undervalue the home, dollars are left on the table.  If you overvalue, the home will not receive offers and will languish and become stale.