Comparative market analysis (CMA) is the price the homeowners decide to put on her properties based on the similar properties sold in the area recently. It is a prediction of how much the home will be priced. The price prediction is available through the listing prices. Accordingly, the sellers can determine the competitive price offers.
Comparative market analysis involves the consideration of properties’ location, size, age, style, construction and other factors. Compared to home value estimator, comparative market analysis has more complete factors contributing to the properties’ price estimation.
Now let’s understand more about comparative market analysis including how the analysis works and how the report is.
About Comparative Market Analysis
Comparative Market Analysis is very helpful for the sellers in choosing the best price in the list. The price will be the properties’ price which won’t be too low so that the sellers won’t have more debt.
Comparative market analysis allows the sellers to compare the property price and determine the competitive offer for the potential buyers. Comparative market analysis also leads to sell the properties fast because the buyers take the home as they think it has already competitive price.
As the name suggest, the comparative market analysis works by comparing the home price with those of recently sold. This way, it is difficult to find the recently-sold homes in the market in rural areas. Therefore, home appraisal can probably be the better option.
So, what is actually a comparative market analysis? It is a price prediction or estimation. How would you estimate a property’s price? Use a comparative market analysis.
How A Comparative Market Analysis Work
There are more that a CMA does to estimate the price of properties. In this regard, there are some basic steps of what a CMA does to provide an accurate price estimation. How does it work?
Observing the Neighborhood
Observing neighborhood is the primary thing a CMA carries out. Look at the blocks, community amenities, HOA rules and nuisance. The more the neighborhood looks attractive and less problematic, the higher the CMA is.
Gain the Property Details
A detailed analysis must be presented by the sellers in order to rise the properties value. Therefore, through comparative market analysis, the property details will be completely included in the report. To obtain the detailed information, the real estate agent will carry out CMA by making an in-person visit. The information usually includes the home’s size, constructions, style, age, condition, landscaping, layout, finishes, updates and upgrades.
Choose The Comps
Comps are the comparable homes that are recently sold and located in the same district. Find homes with the similar type and constructions, size, square of footage, kinds of rooms inside and etc. Focus on the time they have been recently sold. The more recent they have been sold, the better data you’ll obtain. This relates to the price fluctuation. The data you result from doing comps will be used to compare the price.
Adjust for Differences
In comparative market analysis, there are some differences you need to adjust. The differences lay on the home and comparable properties. Each of the difference comes with the difference price. Therefore, the broker should adjust the price. However, if there is any inferior feature, particular price should be adjusted.
For instance, an additional bedroom means being paid more. This way, the seller should remove the amount from the comp to pay the additional bedroom. It makes the target home never being adjusted.
Determine The Home Price Per Square Foot after Adjustments
Once the home price is adjusted, the next thing that a comparative market analysis should do is to determine the price per square foot. Add the price of the sold home per square foot and divide by the number of comps. This is to find the average. Then, multiply the average by the square feet of the property. The result will be the estimated price.
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Comparative Market Analysis Report
When a comparative market analysis is done, the result will be presented in terms of report. The report contains the details of the findings. Though there is no standardization on CMA report. However, the report usually contains the following specific information.
- The property’s location and a few comparable.
- The property’s description such as floor plan, elevation, the number of bedrooms and bathrooms.
- The sales price.
- The property’s square footage.
- Adjustments for any differences.
- The adjusted sold price of the target home per square foot.
- A reasonable price rage for the target home or property.
All in all, comparative market analysis is one of the best ways to find factors contributing to determine the price of target home. It analyzes all the things dealing with the things that can influence how much the home worth in the end.