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What is a CMA, or Comparative Market Analysis?

Alcove Team | 7/30/21

What is a CMA, or Comparative Market Analysis?

What Is A Comparative Market Analysis?

Pricing your house correctly from the start is one of the most important things you can do when selling a property since your list price can either generate interest or scare people away.

Price it too high, and homebuyers will think you’re unreasonable. Price it too low, and you’ll leave money on the table.

So, how do you make sure to get the price right? You’ll have to perform some research and put together a Comparative Market Analysis report, CMA for short.

Learning how to perform a CMA properly will be one of the most helpful things you know about the real estate industry. Let’s take a look at what a CMA is and how you should be doing them.

What is a CMA?

A comparative market analysis is a report that is used to determine the value of a property. This report will compare the features and amenities of a subject property to similar properties that have either just sold or are listed on the market. 

What features should be included?

For the most accurate report, you want to look for three to five similar properties.

Since market conditions can change pretty quickly, it is best to look no further back than six months for recently sold properties, but it is essential to find currently listed properties so you know what your competition looks like.

It is also best to find properties located in the same neighborhood or a similar nearby neighborhood. As far as the actual property features go, you should look for the following:

  • Square footage

  • Number of bedrooms

  • Number of bathrooms

  • How many stories

  • Pool or no pool

  • Lot size

  • Age of property 

The good news is, these parameters can be easily filtered through software or sites like Zillow or Redfin. Where your expertise will need to come into play is in sifting through those results. 

You want to find homes that are in similar condition to your subject property. If your property is full of upgrades, you’d want to find another property that is too. On the other hand, if your property is in bad shape, you’d want to compare it to another property that was as well.

realtor.com

What if there are no similar properties?

 If the property is located in an area where homes don’t go up for sale very often or if your property has many custom features, there might not be properties that are similar to yours.

In that case, you’ll have to find properties that are as close as possible and then add or subtract money based on amenities. 

Determine your price

You’ve collected and analyzed your data, now it’s time to price your property. You can look at the price range of the properties currently listed for sale and either list your property just above or just below that number, depending on how quickly you’d like the property to sell.

If all of your comps (comparable properties to yours) are recently sold properties, you can add a percentage to the price based on how much the market values increase each month.

Now that you have that figured out, you can confidently list your property for sale knowing that you have priced it correctly. Watch those offers roll in!