A comparative market analysis (or “CMA”) is a report prepared by a real estate agent to help a client determine the value of a home. The report analyzes recently sold properties that are similar to the home in question.
CMAs are a valuable tool that buyers can use to ensure they are making a competitive offer on a home. CMAs are also used by sellers to help determine an accurate listing price. What is included in a real estate CMA?
CMAs include descriptions and data points for the comparable properties (or “comps”) that help inform the fair market value of the home in question. The most accurate comparable homes are typically sold within the past three to six months. However, in rural areas or unique real estate markets it can be challenging to find recently sold comps.
Here is an example of what is in a CMA. Let’s say you’re interested in purchasing a home that is listed for $400,000. It is a three-bedroom, two-bathroom single family home in Lakewood Ranch with low HOA fees. It has been recently updated with new paint, appliances and fresh landscaping.
Your agent will likely compile comps based on the following criteria to prepare a comparative market analysis:
- Sold Date: with a focus on recent sales
- Location: with a focus on the same neighborhood
- Size: including number of bedrooms and bathrooms along with square footage
- Year Built: noting exceptions of homes extensively updated
- Quality: selections should have similar updates and upgrades (pools & spas matter here as well)
- Taxes and fees: narrow comps by those with similar HOA fees, CDDs and taxes
Of course, no two homes are identical, so your agent does not need to find an exact match. Anytime they are 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.
CMAs are more accurate than researching comps on your own. 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 unusual price, they may be able to call the listing agent to find out why.
Real estate agents 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.
CMAs are an important tool in the home buying process. Without a CMA, you risk overpaying for your home, which is also 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.