Comparative Market Analysis (CMA) = Home Evaluation
One of the frustrations a first time home seller or buyer may experience is trying to decipher the jargon others toss around casually – such as a suggestion that you obtain a CMA. And even when it is defined as a ‘comparative market analysis’, you may not have much of a frame of reference to help you understand it. Simply put, a CMA is a report to help determine appropriate pricing, based on what similar homes have sold for. It may be a short synopsis or a long detailed document, but in either case it should contain several basic elements. To demystify the comparative market analysis, the basic elements are broken down as follows:
These are the homes in the neighborhood that are currently on the market. These homes are your competition. They may or may not be priced realistically – usually, some of them will sell at their listing prices and some will sell for less.
When the buyer and seller have reached an agreement as to price and they await final closing process, the listing is considered a pending sale. An outside observer cannot know at this point what the final negotiated selling price was - do not assume that the seller got his full asking price, however. The listing agent is under no obligation to reveal that information until the sale has closed. Pending sales do, however, indicate the general direction of the market. A home priced significantly higher than pending sales risks a much longer time on the market.
Homes that have closed within the last six months are the best indicators of the current market. The home appraiser hired by a buyer will also take these prices into consideration when determining the official appraised value of your home.
Off-Market / Withdrawn / Canceled
Listings are cancelled for a number of reasons, ranging from the seller changing his mind to a refusal to make requested repairs. But one common reason is that the home is priced higher than the market will bear, and therefore is not competitive enough with other homes on for sale.
These homes did not sell during their listing period. Perhaps the agent did not put much effort into the sale or the owner may have simply asked for more than the home was worth.
Examining Comparable Sales
This allows you to compare sales of properties similar to your own. You will want to take a look at houses that are most like your own and analyze the price.
Similar age of construction
Older homes will usually not command the same price as newer construction.
Similar amenities, upgrades and condition
Each significant upgrade will raise the price of the home as it becomes more appealing to a buyer.
Two homes that are comparable in all other details will be priced differently according to the desirability of the neighborhood.
Setting the appropriate price does not guarantee the quick sale of your home, but it does go a long way towards reaching this ultimate goal. The wise seller uses the comparative market analysis to bring his price in alignment with the current market.