A comparative market analysis is one of the best ways to find out what your home is worth in today’s market. So what is a comparative market analysis and how can you use it?
The Definition
The purpose of a CMA is to compare a subject property against comparable nearby homes that have recently sold or gone under contract. These comps provide a reference point for how much a buyer might pay for a home that’s about to go on the market. A CMA features a list of property details, interior & exterior listing photos, and market analysis for the surrounding area. These details are extremely helpful when trying to price a home that hasn’t been listed yet.
Let’s break down each part:
Property Details
A CMA will start with the property’s address and a map showing the lot and the surrounding properties. Next, you might see a brief paragraph that introduces the home above a full list of every detail in the home. The introduction might highlight the most desirable feature of the home, like great scenery, renovations, outdoor entertaining space, and more.
Below the introduction is a list of home facts that include the number of bedrooms & bathrooms, the square footage, lot size, the year it was built, and more.
Extended home facts
Next, the CMA outlines additional property features, like:
- Interior Features: Kitchen & bathroom features, HVAC systems, square footage of each room, etc.
- Exterior Features: Details on the roof, foundation, parking, lot size, scenery, etc.
- Location Details: Directions to the home, the name of the community or neighborhood, walkability, and details on the HOA (if applicable).
- Schools: Names of schools in the school district.
These details can have a direct impact on the value of the home. For example, if a property is in a highly desirable neighborhood or school district or beside a park with walking trails, those are selling points that can increase the price.
Property Photos
In today’s world, almost every real estate sale starts with an image (or gallery of images) of the home. According to the National Association of Realtors’ 2020 Generational Trends Report, photography was the most important online feature when shopping for a home among almost 90% of buyers under the age of 55. Some studies have also shown that quality photos help sell homes up to 32% faster.
When a REALTOR® is creating a CMA, they haven’t yet hired a professional photographer for a photo shoot. They may use pre-existing photos of the property (possibly from the time when the home was previously listed) to provide context and personalize the report.
Property History
The property history page shows how the property’s estimated home value compares to the values of other homes in the same area based on public records and MLS sources. It can also include details on the home’s previous sales and its assessed values and taxes for each year.
Market Activity
Here, the seller can see details on:
- The median home value, median listing price, sales volume, and median days on the market as compared to the same month in the prior year for their market.
- A list-to-sale price ratio that shows how many properties have sold below & above their listing prices.
- A summary of price adjustments made to listed properties on a monthly basis
Market Health Charts & Comparisons
CMA’s can sometimes dive deeper into the market with charts that show key information about what’s selling and what price it’s selling for. This can include things like:
- Estimated home value versus sales volume
- Median listing price versus listing volume
- Types of listing inventory
- Median sale price by square footage
- The price range of sold homes
- The price per square foot of sold homes
- The age range of homes sold
- Number of bedrooms in homes sold
Comparable Properties
Comps are comparable properties in the area that are currently on the market, have recently been sold, or have a pending offer.
There may be some key criteria that properties have to meet to be included in comps, like:
- If it was sold or listed in the past 6 months
- Its size is within 20% of the square footage (interior and exterior) of the subject property
- It’s located within the same community or a similar community.
- It’s the closest possible proximity to the subject property.
Active Properties
A CMA may also include a list of active listings in the area. This offers a quick comparison of key information for each property, such as the address, list price, listing date, number of bedrooms & bathrooms, square footage, age, and more. There may also be a dedicated page for each of the active properties that shows a photo, map, and additional details for each property.
Having data on other active listings can be very helpful in determining the listing price because it shows the seller what is happening in the market in real-time.
Pending Properties
Pending properties are properties that have accepted an offer and have gone under contract within the past several months but have not closed yet. They offer the most recent & accurate data on what’s happening in the market.
CMA’s can include a comparison chart of selected pending homes and may provide a detailed page for each of those properties, as well.
Closed Properties
Properties that have recently sold in the area are closed properties. A CMA might include similar nearby properties that have closed in the last 6 months. REALTORS® will look for properties that have similar square footage, amenities, and comunitites to include.
Closed comps also provide the opportunity to compare the list-to-sell ratio to help gauge which direction the market is going. If several comparable properties have sold above the asking price, your property may do the same. On the flip side, if comparable properties are selling below the asking price, that could be a signal that the market is on the decline.
It’s important to remember that the sale price of a closed property can be a little outdated since it may have been several months since the buyer wrote the offer.
Recommended Pricing Strategy
Your REALTOR® may include a recommended pricing strategy based on the high, low, and median prices of all of the active, pending, and closed listings in the CMA.
Seller’s Proceeds
One of the most important things for the seller is the amount of cash they’ll have after the sale closes. Some CMAs may also include a worksheet to help the seller predict how much their proceeds would be if the home sells at a lower price, higher price, and after deducting mortgage balances, closing costs, concessions, and other fees.
A comparative market analysis can be incredibly helpful in selling a home. Not all versions have the same level of detail as we’ve shared here, but it’s important to find an experienced real estate agent to assist you in the process.
Team Melton has over 50 combined years of real estate experience to assist you through every step of the process. Contact us today to get started on selling your home!