Comparative Market Analysis Basics
With the end of the year here, home sellers are doing whatever they can to make their homes the most on the market. To attract prospective buyers, things like well-maintained curb appeal and properly staged rooms are a major help. But there is one factor that can drive buyers to—or from—a home in a hurry. If the sales price is wrong on an otherwise perfect home, it may never stand a chance of selling.
If you’re planning to list your home this fall, you’ll obviously want to set a fair and competitive price. To do so, make sure your professional real estate agent completes a comparative market analysis, or a CMA. This report of similar homes that are currently listed, have recently sold or have even been withdrawn from the market, can give sellers the extra confidence and peace of mind that they are setting the right price to get their home sold.
Why is it so important to compare your home to others on the market?
Reviewing other homes that are currently for sale makes you familiar with your competition, but it won’t dictate your sales price point. Instead, your agent will review similar homes that already have sold (typically within the last three months). These homes paint a truer picture of what buyers are willing to pay—and where appraisers are likely to value your home. Armed with this knowledge, sellers can more easily set the right price for their homes.
What aspects go into a CMA?
With so many homes on the market, how is a real estate professional to know which homes to compare a seller’s home to? Well, they examine a few key factors in homes that have recently sold:
1. Age When real estate agents look for comparable homes, they look for homes that were built around the same time. Particularly in today’s planned developments, construction and layout among homes are similar, which makes for a more even comparison. So, if a home that has recently sold has the same layout as a seller’s home, it might be a good candidate for the CMA.
2. Size Of course, square footage is also an important factor when completing a CMA. But, as we’ve mentioned, when real estate agents compare similar homes, they also look at the layout. Why? It is a lot easier to compare two two-story homes to each other than it is to compare one two-story home with a ranch. Agents will look for homes that have similar square footage and structure when they are completing a comparative market analysis.
3. Location Frankly, a two-story home in the city and a two-story home in a far-off suburb are not ideal for a CMA. Though they may have a similar construction date and layout, their respective locations make them far less than a match when it comes to an equal comparison. Instead, agents look for homes that have recently sold in or near the same neighborhoods where their clients are planning to list their homes.
4. Extras So, a real estate agent finds a few homes with similar construction dates, layouts, and locations. What do they look for next? The amenities. Ideally, if a seller is hoping to set a higher price point, their home will have a few more amenities or upgrades than homes that have recently sold. We’re talking about finished basements, upgraded flooring and possibly an incredible walk-out deck. OK, that may be a stretch, but if a seller is hoping to set a higher price, upgrades matter when it comes to a CMA.