It’s important to know the market value of a home before making an offer or buying it, and with CMA you can never go wrong when estimating the value of the home, irrespective of the home value estimator you are using. “What is CMA real estate?” you may be wondering. CMA stands for comparative market analysis, and it is a helpful tool in determining the value of a property. A CMA can help an agent in pricing their subject property and also determine what other properties are valued at. If you’re interested in learning more, this blog post has all the information you need.
What is CMA for real estate?
A CMA is a comparative market analysis, which involves looking at similar properties in the area to determine their sales prices. A CMA can help an agent price real estate property and also determine what other properties are valued at. The most important part of this process is gathering data on recent home sale prices or listing prices so that it can be compared against your subject property’s current pricing situation (current list price).
For a comparison like this to work, there are a number of factors to consider, including the number of bedrooms and bathrooms your property has as well as its square footage. With this information, you can get a CMA done in your area and see where your property would fall.
Simplified Comparative Market Analysis (CMA) Process
First, gather all the necessary data for comparative market analysis such as the number of bedrooms and bathrooms as well as square footage for the subject property. Create a list of comparable properties by going to home value estimators like Zillow or other websites that offer recent sales prices.
Next, make note if there are any “recently sold homes” with a similar number of beds/bathrooms and sq ft on those sites (addresses should match). Take into consideration price per sq ft when reviewing them so that you have an idea of what it will cost to sell comparably priced houses in the area (you may want to make a note of the price per sqft so you have it for later).
Look at each comparable property in your list. Write down what they are: location, square footage, and sales price as well as status (i.e. on market vs sold). Then take all this information and plug it into the CMA spreadsheet to get percentage change from the original asking price to the current listing/sales prices within 100% -125%. This will show you how much previous owners may have overpriced their home or undervalued theirs, giving insight into whether your subject property is priced appropriately or not according to recent trends in the area [a reference can be found here]
What is included in a comprehensive CMA for real estate?
The CMA provides you with a snapshot of the most recent activity in your neighborhood, allowing you to see how much prices have increased or decreased. You can also use it as a benchmark for what price range your home should be listed at based on comparables. The CMA is not only used by real estate agents but appraisers and homeowners too.
The complete comparative market analysis includes the following:
Zillow Zestimate
What is a Zillow estimate? The Zillow Zestimate is an estimate of the worth or value of your home. This tool can help you figure out how much to list your house at. It will also show recent sales prices for homes in similar neighborhoods, neighborhood trends, and estimated time on the market based on past listings from that area.
The calculation behind this algorithm considers property information such as age, size, style, lot type, and location when estimating the price range for a given address [a reference might be helpful]. These calculations are updated every day by taking new data into account – like recently sold properties- so they’re always up to date with current real estate values!
It’s important to note that the Zillow Zestimate is not an appraisal. However, it can help establish a listing price for your home when you’re looking to sell.
Realtor’s Property Research (RPR)
Your CMA must include an RPR on the subject property. An RPR includes:
- The number of bedrooms and bathrooms in the home, square footage, lot size, and zoning information
- Comparative listings for similar homes that have recently been sold nearby or are currently on the market
- Year built, last updated year if a condo/townhome complex
It is critical to include this data when conducting your CMA so you can establish an accurate listing price for your home. Without it, you run the risk of pricing too low – which means less commission potential for yourself as well as other agents who may list with you after that point. It’s also important to note that buyers take notice of comparable property prices during their search process; they want to know what homes are selling for in the area, so they can feel confident that their offer is a reasonable one. Real estate agents can access the RPR system for free, as long as they have the NRDS number and password from the MLS.
Tax Records
Tax records come just as another piece of your comprehensive CMA because they can provide insight into your property’s value. For instance, a new home that has never been lived in may be assessed at one price while an older house with many renovations might be assigned a higher valuation. Of course, they will not be giving you a fair value of the home but they are an important detail to consider when doing CMA.
Multiple Listing Service
Here is where the real calculation of comparative market analysis begins. CMA providers have access to the MLS, which is a collection of properties that are currently for sale or recently sold. By comparing your property with similar homes within a certain radius and in the same condition (square footage, number of bedrooms, bathrooms), you can get an idea of what it could sell for if put up on the market today. It will be your best friend for CMA research for many reasons, but it’s also important because you will need to be able to convince sellers that they should sell their properties.
10 Rules to follow when doing a comparative market analysis CMA
1. Number of bedrooms and bathrooms:
A CMA will show you the average number of bedrooms in homes sold within a certain radius. You can use this information to help make an argument for why your home is worth more than others that are selling nearby because it has one or two extra bedrooms. For example, if there were 30 recently sold properties within a mile from yours with two-bedroom units, but your property had three bedrooms…you would be able to argue that its value should be higher.
2. Square footage:
You’ll need to know how much square footage the comparable properties have so you can compare them on the size as well as price per square foot (PSF). Take note about what types of rooms these other properties have, as well.
3. Comparable sales:
You’ll need to know what the total dollar amount of recent sales was, so you can see how much people are paying for homes in your neighborhood and figure out where your home’s “market value” is on that scale. Listing prices will show you a rough estimate of what other agents may be expecting from an offer price–but they’re not always accurate! You’ll also want to compare sold properties–not just listed ones–to find out which properties were actually worth more after they traded hands via sale rather than listing price or CMA analysis alone. The average market time (the time it takes for a property to sell) in any given area should also come into consideration when you’re deciding on a listing price.
4. Cost of CMA:
The cost of analysis should be fairly minimal- perhaps $200 or less for most agents, depending on the number of recent sales and how many properties you want to compare your subject’s value against. The cost is usually deducted from the commission if it results in a sale, so there’s no risk in making that investment! Just remember to factor any expenses into when you finally set your own asking price.
Other considerations:
When setting up a listing with online real estate listings sites like Realtor.com, they’ll have different minimums for listing prices based on their total exposure. Some may allow homes priced below $500k whereas others may only take listings with prices over $750k. Different states may also have different minimums, so you’ll want to check your local association’s listing price requirements before setting anything in stone.
5. Competitive offers:
One of the most difficult parts about pricing a home is understanding what other properties are commanding and how that affects yours–especially when one or two homes sell for significantly more than others near them. You can be confident that if there isn’t any competition on comparable sales, then it makes sense to set up an asking price similar to these competitors’ (unless they’re priced too high). On the opposite side of things, competitive markets mean lowering your list price as well; buyers will feel like their offer has a better chance of being accepted if it’s close to other offers on the market.
6. Recently Sold Homes:
If you’re looking to sell your home within the next 12 months, make sure you know what homes recently went on sale so they can serve as good comparables. A seller will usually want their return after one year (or some other time frame) similar enough to those recent sales numbers; you don’t want to sell your home for less than a similar property in the area.
7. Price per Square Foot:
One of the most important things you need to know when shopping for homes is the price per square foot. What’s more, this number is usually available on realtor sites and other listings so it can serve as an easy point of reference before ever viewing any properties.
8. Listing Prices
Just like pricing per square feet, listing prices are always at agents’ fingertips, eliminating surprises with CMA and making them better prepared because. They can make decisions about if this home will work or not based on its asking price alone (assuming all else checks out). Unique Features/Home Offerings: If there happens to be a home we are interested in that is currently listed for more than the price per square foot, then we can play to its unique features. CMA helps one do this by giving an idea of what homes are selling at their current market value and how much competition there might be.
9. Neighborhood CMA for the subject property
For example, if we are looking at homes in a neighborhood that is known for their high square footage and low listing price per square foot then CMA becomes more or less useless. This is because the listings have to be priced competitively with each other so buyers can’t really pinpoint any particular home as being overpriced based on its features.
10. Construction status
Is this a new building or previously occupied? To find out the construction status of a property, we need to look at which phase it is in. If there are no phases listed for this particular property then it must be new and hasn’t been sold yet. CMA can still help us figure out what comparable properties have sold for during their pre-construction stage because these homes may not have any other data that would show how much they were priced or where they stand on square footage (i.e., the home could be sitting in an empty lot).
How many comparables should you look for in a CMA?
Ideally, we should be looking for at least four properties to show the most accurate representation of value. A comparative market analysis CMA is based on a “best-case scenario” and more comparables will indicate that the market price could go up or down depending on what other homes are selling for in those specific areas. Comparables are crucial factors that allow you to make adjustments on your comp wherever possible.
Widening your search in comparative market analysis, CMA
We should not just look at one property in a CMA because that could skew the numbers and show an inaccurate picture of value. For instance, if we are looking into the price per square foot, then this metric would only be accurate for houses with similar size rooms or bathrooms.
For example: If two homes were on the market but one had three bedrooms and another had four bedrooms, then it is much more likely to have a higher price per square foot than when you compare those same two houses where both have five bedrooms; therefore offering less per room. That may seem like a lot of information upfront about the comparables properties used for your CMA but narrowing these details will allow us to offer our clients as thorough analysis as possible so they can make the best decisions possible.
Keep in mind that buyers and sellers are always looking for simplicity and details. You can get a home’s value and add more details to make your customers happy. Try using this order:
- Square feet
- Age
- Age of the listing (six months, 12 months, and so on.)
- The listing’s location
Easy Steps to do a comparative market analysis CMA
Step one: Get your Zestimate and go through the RPRS (recently sold property report)
The first step in a CMA is to get your Zestimate and go through the RPRS. The more information you have, the easier it will be for us to help our clients make an informed decision about their real estate needs. Be sure that these reports are current! Sometimes they lag by as much as six months or more so this can skew your results.
To do this, head over to Zillow’s website and enter your address into the “Z” toolbar up top there on the left side of the screen at the top. You’ll want to click on one of those little boxes below each subject property because what we’re going for here is a CMA.
You’ll also want to check the box that says “Zestimate” and then hit enter or go ahead and click on it after you’ve done this because you don’t need all those other things like square footage and the number of rooms to get your Zestimate.
Step two: Do your MLS System CMA
Next, you’ll want to go over to your MLS system and find out what properties are listed for sale. You can do this by using the search function on the top left-hand side of the screen there. Type in “Sold Listings” or some such thing like that into it and then click enter or again, just click on one of them if they look good enough for ya’. After a few moments, we should come up with something nice looking here which I will call our property A.
We’re going to be doing comparative market analysis Cma – so let’s get started! Click back over at Zillow where we were before (click around until you see a box called CMA) and start typing in these properties.
It should be a good idea to have your property A up on the screen for all of this CMA stuff so that you can keep referencing it and see what’s going on with the comparison as we go. It would also probably be smart to use a tab or something other than entering key here, just in case two listings show up at once due to different spellings (the system will only take one). Be sure to keep your eye on the comparables to know when to expand or thin your search.
Step Three: A comprehensive analysis of comparables
You should see a list of “available” “active options” on your list of properties and “sold” ones too. Active means the sale is still pending. Now check the comparative market analysis summary. You will see the average sell price per square foot (SPF), the average number of sleeping rooms and bathroom areas, and how many square feet there are in each home.
The comparative market analysis of real estate requires a lot more work than just doing one search on public listings for what you’re looking for. You have to find your subject property if it’s not already listed and list it as well so that you can compare its prices with other properties in the area. The next step is listing all available comparables to make sure they match up. For example: If you want to know about homes downtown within walking distance from schools, then you would be comparing those specific things when evaluating these types of comps since my desired traits wouldn’t apply across the board. Keep this in mind!
Step Four: Applying the CMA Summary
This is the final step and time to summarize your CMA report for your client, giving them a market value of their property. Your summary should include an overall number of how much a property will cost as well as where it ranks by price per square foot against all other properties in the area (and not just those that are currently on sale).
Start with listing out what you have found, such as any outliers or trends. Be sure to point out anything that may be beneficial or detrimental about the subject property so they know exactly what they’re getting themselves into when buying this home.
Doing a comparative market analysis of real estate for difficult properties
As real estate agents, we come across properties that are difficult to sell. One of these properties is when the property was previously lived in by a family with a large number of children. There are many reasons for this including wear and tear on carpeting and furniture as well as stains that won’t go away easily. The problem arises because buyers want their own space but also don’t want kids running around all over the house or making too much noise late at night.
A CMA allows us to gauge how other similar homes in your area have sold so you can tell your client whether it’s worth listing their home for sale now or if they would be better off waiting until later in the year (for example). It also gives them the information they need to decide whether or not the price they want is realistic. CMAs can also help you determine what your competition might be and how much of a buyer there is in the area for any particular type of property.
Here are some of the most difficult situations:
Remodeled homes or homes with a lot of features
If the home is newly built, we can study how much the builder charged and use that as an estimate for what you should be asking. With remodeled homes, it’s more difficult to know if something different has been done or just repaired but CMA still helps us in negotiating price.
Consider the images of comparable properties that were recently sold to find the value. CMA’s will let you see how much the value has gone up in your area over time. This can help determine if it is worth selling now or wait until later when there might be more buyers looking for something like that.
Houses with upper fixes
CMA’s can help you understand the value of homes with upper fixes. As there are so many variables, CMA is a great way to get an estimate of what the price point should be. You can also use it as part of your negotiation process for buyers who want to make offers. Consider if the fixing is very nice, average, or not nice enough. And then start your CMA process the same way as above.
Rural areas
Doing a comparable market analysis for homes in rural areas can be challenging. When you’re checking the sales prices of other homes, make sure they are in similar conditions and not just a one-off. It can be hard finding suitable comparable homes. Try using the acreage filter to get the best value of the home.
Other tools for comparative market analysis
You may not have an RPR, but that should not worry you. There are other tools you can use to get comparative data. There are other programs that should offer the same results., including:
CMA Cloud
CMA Cloud is a subscription-based service that you can use to complete CMA reports. It offers the same type of data as an RPR, but it does not allow buyers to list their own properties to get comparative pricing updates.
House Canary
House Canary is another CMA program that doesn’t require an RPR. You can find a lot of data on the website, including recently sold homes and average home prices in your area.
Tool Kit CMA
Too Kit CMA is a program that you can use to create your own comparative market analyses. It’s not the most user-friendly, but it does have some benefits for people who are familiar with Excel and other similar programs.
Comparative market analysis – FAQs
How long does it take to complete a CMA?
A typical CMA takes about 15 minutes. It’s not hard at all! Just enter your property address, square footage, and number of bedrooms into the cloud-based service provider that you chose (for example, House Canary)
What do I need before I start my comparative market analysis?
You’ll need to have an idea of what price per square foot you’re expecting for your house. You can find this information online on sites like Zillow or by talking with local real estate agents who specialize in homes similar to yours.
Will people be able to see my personal details when they look up listings using CMA reports created from the site?
No. CMA reports are created using a map and a list of homes for sale but the only information about each home that’s visible is the address, number of bedrooms, and square footage.
What if I don’t want to share my personal details?
You’ll need to provide an email when you sign up on either House Canary or Livedoor so we can send your CMA report to you as well as any alerts from other agents in your area who might be interested in marketing their services to you. You’re able to set up two emails – one public and one private (the latter will not be shared with real estate agents).
Conclusion
We covered the basics of comparative market analysis for real estate agents. We discussed how to identify a property’s value by looking at its comparable listings and research properties in your area. This should make your work much easier as a real estate agent. Now that you know what CMAs are, let us know if you have any questions! Our team is here to help as much as possible- just shoot us an email or give us a call anytime with anything related to our business.
