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How a Comparative Market Analysis Can Pay Off

Tracy Reynes
Oct 16 4 minutes read

Buying or selling a home can be intimidating, and lots of money is at stake. Use a comparative market analysis to formulate a smart strategy.

If you are getting ready to buy or sell a house, it's to your benefit to do your research. Knowing as much as possible about the local market - and recent sales or listings involving properties like the one you own or want - can pay off in a big way. A comparative market anlysis is an important resource to help you be a smart, well-informed negotiator.

What is a Comparative Market Analysis?

A comparative market analysis (CMA) is a report that compiles key informaiton and data to establish an estimated fair value of a certain property in current market conditions. The CMA is designed to provide a snapshot of current property values at that specific time in that area. Its purpose is to help a buyer or seller make the most informed decision when establishing a selling price or offer amount.

A CMA is different than a real estate appraisal.

A CMA is created by a real estate agent. An appraisal, on the other hand, is performed by a licensed real estate appraiser. It is requested by a bank or other lender prior to approving a mortgage or refinancing loan. If the appraisal is too low, the lender may decline the loan request.

A CMA contains a variety of relevant information.

The style, length, and level of detail of a CMA can vary widely. This often depends on an agent's particular preference, but can also fluctuate even within a single agency.

A typical CMA goes way beyond just listing comparative sales - although that's part of it, as you will see below. While the particulars can differ, most CMAs contain several key components:

  • Basic stats and information about the specific property, such as the square footage, location, number of rooms, lot size, age, and any unique selling points or unusual features.
  • Active listings. These are properties currently listed for sale on the Multiple Listing Service (MLS).
  • Sold listings. Known as "comps", these are familiar to anyone who has ever bought or sold (or attempted to sell) a property. This info is considered more useful than active listings because this tells you what buyers have actually paid for properties recently, whereas active listings just tell you what sellers are hoping to get.
  • Listings that expired or were taken off the market. While listings can go stale or be removed for a variety of reasons, one of the most common issues is that the price was too high. So this can serve as a guide to the ceiling for prices in that area.

A CMA is a valuable tool for buyers and sellers.

CMAs can be an asset for both buyers and sellers. As a seller, you want to get the highest price possible for your home while still remaining competitive so the house won't sit on the market for a long time. As a buyer, you want to be educated about prices for similar properties in the area so you can submit a fair offer without paying more than necessary.

Agents often use CMAs to attract clients

Agents use CMAs to help demonstrate the value they add. Since a CMA contains some information that is only available to agents, this is exlusive intel that the average property owner wouldn't be able to access on their own. In addition, the agent can also add their own insight based on their firsthand recent experiences evaluating and listing properties in that area.

*Article courtesy of Trulia

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