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A comparative market analysis, commonly abbreviated as CMA, is a report prepared by a real estate agent to help a client determine the value of a home. The report analyzes three or more recently sold properties similar to the home in question, usually chosen based on their similarities in size, location, age and quality.
CMAs are a valuable tool that buyers can use to ensure they’re making a competitive offer on a home. CMAs are also used by sellers to help determine an accurate listing price.
What’s included in a real estate CMA?
CMAs should include descriptions and data points for the comparable properties (called “comps” for short) that help inform the fair market value of the home being evaluated. The most accurate comparable homes are typically sold within the past three to six months. However, in rural areas or slower real estate markets it can be challenging to find recently sold comps.
Here are homes that will likely be omitted from a CMA:
Active listings: Homes currently on the market could be mispriced, so there’s no way of knowing a home’s true value until it’s sold.
Pending listings: The same goes for pending listings — they aren’t a sound indicator of a home’s value, since the deal isn’t yet finalized. If your agent can get details on the contract price of a pending listing, rather than the public list price, then the home might be used as a comparable property.
Deactivated listings: Again, since there’s no way of knowing what a buyer would actually pay, your agent will likely avoid homes recently pulled off the market.
Comparative market analysis example
Let’s say you’re interested in purchasing a home that’s currently listed for $230,000. It’s a three-bedroom, two-bathroom single family home in the city, in a good school district, with low HOA fees (under $100 per month). It’s been recently updated with new paint, new finishes and fresh landscaping.
Your agent will compile comps based on the following criteria in order to prepare a comparative market analysis for you:
Sold Date: A comparable home is often sold within the last three to six months, or within the last year in rural areas.
Location: Homes used as comps are often in the same school district, within the same neighborhood, and with similar surrounding areas—for example, if the home being evaluated is on a quiet cul de sac, the best comps should be too.
Size: Comps typically have the same number of bedrooms and bathrooms, roughly the same usable square footage and the same presence or absence of a basement and garage.
Year built: Ideally, comps are of a similar age, unless one home has been extensively updated.
Quality: The comps selected should have similar updates and upgrades, similar finishes and features and should have been cared for at a similar level.
Taxes and fees: Savvy real estate agents also try to narrow comps by those with similar HOA assessments and similar taxes. Why? Because all factors should be close to equal.
Comparable homes are similar, but not identical
Of course, no two homes are identical, so your agent doesn’t need to find an exact match. Anytime they’re evaluating comps, agents will get as close as they can to the home in question, then adjust as necessary to make an informed recommendation as to the home’s value. Here’s an example of comps that are perfectly valid, but not identical, continuing with the example above:
- Comp 1 sold for $235,000. One fewer bathroom, same street and finishes, smaller yard.
- Comp 2 sold for $275,000. Same number of bedrooms and bathrooms, newer build, additional square footage due to finished basement.
- Comp 3 sold for $245,000. Same number of bedrooms and bathrooms, same size, but not as updated.
Using these comps as a guide, the home you’re interested in buying, has a value of somewhere between $255,000-$270,000. Your agent can help you determine a competitive offer price.
How is a CMA different from running your own online comps?
Simply put, CMAs are provided by real estate experts in your local area who have access to more market details than a layperson. However, you can compile a preliminary home market analysis using public data online. When you’re ready to make an offer on a home, you may benefit from a professional comparative market analysis to pinpoint a fair and competitive offer price.
Here’s how CMAs are more valuable than simply researching comps on your own:
They’re more accurate: Real estate agents have access to additional information that buyers may not. For example, if an agent sees that a comparable property sold for an unusually high price, they may be able to call the listing agent to find out why — perhaps seller closing credits played a part in the high price. Or, if a property sold for less than anticipated, it could be because it was sold to a cash buyer who was willing to close quickly.
They incorporate unique information: Real estate agents have access to the local MLS, where they can source a wealth of information on a specific listing, provided directly from the listing agent. For example, they may be able to see the financing specifics of a recent comp, which can affect the final sale price.
They have local market knowledge: Every individual real estate market is unique, and the real estate agent drafting a CMA knows how to adjust prices to account for differences in homes that are more or less valuable in your specific area. They also know which neighborhoods and types of homes are in highest demand.
Remember, CMAs are an important tool in the home buying process. Without a properly prepared CMA, you risk overpaying for a home, and your home is likely your biggest investment. Overpaying for a home can have both short- and long-term consequences, from the lender appraisal coming back too low to the inability to make a good return on your investment when you sell the home down the road.
How to get a comparative market analysis?
If you’re working with a licensed agent, they can provide you with a CMA for every home you’re interested in putting an offer on during the course of your home shopping process. Usually, they’ll do this without you even asking. It’s part of their job to help you determine the best offer price for a home.
Is a CMA the same as an appraisal?
No, a CMA and an appraisal are different, although a similar process of comparing properties is used to gauge value. The key difference is that a CMA is completed by an agent and an appraisal is performed by an unbiased licensed appraiser. An appraisal is usually required by the lender during the escrow period in order to get your loan finalized.