What is a CMA or Comparative Market Analysis? This is data used to determine the current market value on a specific home. Typically this data is taken from a local Multiple Listing Service. It is almost like an appraisal, however not as “in depth” as an appraisal that is performed for a lender or, a specific current value on a home done by a licensed APPRAISER.. Appraisers use the same data realtors do, however they are a Third Non-interested Party to a transaction or value analysis.
We as Realtors are licensed to do this as well, but normally not for loan use or value due to a property that we may have an interest in. If I were representing you as a Buyer or Seller on a particular property, I would be “in conflict” with either party if I performed a formal appraisal on said property. A third party, and not of any interest in the property are used only to evaluate the property for appraisal purposes.
Back to the CMA: Realtors who report on value of a specific property will use data from a local MLS and customarily “tweak” or tailor the analysis on a CMA if the subject property is not exactly “like kind” compared to other properties that have sold. Active, Pending and Sold properties are collected and reviewed and documented to the likeness of other properties and tweaked when a property may have some upgraded materials, a larger lot, house size, pool, extra garage and other factors may have an impact on a property value. Sold properties take priority.
The items below are critical to a proper CMA:
- Homes or Conndo’s sold are similar in size and lot size
- Age of property is same or close to
- Major appliances in similar age, roof similar in age, landscaping, interior of property
- Free of any liens or easements that can affect property value
- Garage size, pool, other structures
- Location, busy streets, close to parks or any environmental issues such as hazardous waste, methamphetamine labs, public utility sites, water sources (i.e. wells and well output)
There are more to list however, the factors above are more common. And each one may have a positive or negative factor to the subject property and analyzed to determine what impact the properties have on the subject property in question.
WHAT TO LOOK FOR: Some agents do not use this method correctly. For whatever reason, they can add a home in the “area” that is newer, larger or not of like kind, and/or not tweak a property value for being on a busy street, original fixtures or Freeway noise (for example). These Agents may want the listing so badly that they convince a Seller that their property is worth more than it really is, so they can get the listing. Their method of thinking is that they will work you down later on in the listing period to reduce the property value and sell your home at a lower price. Of course this is unethical, but there are no CMA Cops policing this concern. It happens more often than you would wish.
If you live in a development, homes of the same floor plan are your best comparables. NOTE: Appraisers and Realtors are supposed to use data no less than 6 months old. So if there is a property value that was sold a year ago, that should not be a part of your CMA.
If you live in a custom home, comparables may be tricky. Make sure it is similar to the house you are looking at. Don’t pick homes that are new construction in a development or homes with acreage.
This is just a quick overview on CMA’s. We work hard to find correct value in determining the list price of a home.. However, Property Value is always determined by what a Seller is willing to sell the property for and, what a Buyer is willing to pay for it. That is the bottom line of what property value REALLY is.
Kate Crist CRS, CNE 559-392-9504 direct