When selling your house, you've probably heard the term "comp," referring to comparable properties to your own. A top real estate agent will perform a free comparative market analysis to determine the best price to list your home, so you can get market value or better.
If you’re looking to put your home on the market or list with an agent, you may have heard the term comparative market analysis. You may have also been the target of emails, ads, or mailers that promise to do a free comparative market analysis to find the value of your home. So, what is it? Does it really tell you what your home is worth?
Some people may think you can just use a Zillow Zestimate and call it a day when determining listing price, but a top agent will work with you to look at the list price of active listings and recent sold properties to get an accurate value for your home before putting it on the market.
What is a comparative market analysis?
Imagine you went to your favorite store to buy a shirt and chose three all made out of the same fabric, all the same size, but with minor differences, such as an added pocket or different colors. Now, imagine you got to the checkout, and the sales clerk rings one up at $45, another at $65, and the last one at $10. When you inquire about the difference in sales prices, the clerk states that the minor differences make the shirts worth more.
Would you still want to buy all three shirts? Probably not. You would probably feel that they should all be closer to the basic white tee’s price because they aren’t that different from each other. You have just performed a Comparative Market Analysis.
A Comparative Market Analysis (CMA) is the process of comparing one item to other items of similar shape, size, make, and value, to calculate that item’s cost. In real estate, you or your realtor will do a CMA on your home when you list it for sale by comparing similar current, expired, and sold listings in the area, to price your home effectively. While we would all love to price our house at what we think it should sell for, a CMA helps you get the best price in the timeframe you want.
When doing a CMA, you'll compare everything from the number of bedrooms and bathrooms, to the square feet in the home, upgrades and renovations you've done, and more to determine your home's value, and subsequently a good sale price.
Is a comparative market analysis the same as an appraisal?
A CMA helps to place a value on your home based on the value others have put on the homes in your area, while an appraisal looks at the condition of the house to see if the value of the property and the structure is worth what the buyer is offering. Both processes collect data on the sale prices of comparable homes to develop a value, but the appraiser is more concerned with condition than a CMA might be.
When there is a high demand for homes, realtors sometimes price houses in the area at a higher price point than an appraisal may say the home is worth, meaning the buyer either has to pay the difference or find a new house.
Why do you need a comparative market analysis?
List your home at the right price with a Clever Partner Agent.
What should I look for in a CMA?
Not all CMAs are created equal. If you want to get the best price for your home without waiting many months to sell it, you want to do your CMA right. Whether you are completing it or having someone else do it for you, here are some things you want to look for in homes you are comparing:
Check out the homes in nearby communities. Are the houses in that neighborhood in the same condition and do they have similar features to your home and neighborhood? The quality of the neighboring amenities really goes far in adding or taking away value from your property. You should take into school district and prevalence of other single-family homes as well when researching recent home sales.
Look at the square footage of similar homes in your area. You want them within 20% of your home’s size. The price per square foot declines as the house gets more substantial, so compare homes that are most similar to your square footage.
Look at online listings of similar homes and comparable sales. Note the condition of the house, the price per square foot, property taxes, and any neighborhood perks, such as an HOA or a gated community. Try to compare to similar properties as close in condition and features as you can find.
Do the Math!
After you’ve gathered all the data from neighboring houses, it’s time to crunch the numbers. Figure out the price-per-square-foot, and add or subtract money based on certain amenities.
While completing a Comparative Market Analysis is undoubtedly worth the time to do it, it may be something you want to leave up to people who know precisely what to look for and can do it a lot faster. Whether you do it on your own or call in some help, doing your due diligence before listing your home will save you headaches and could even help you bring in a lot more money!
For the best experience with CMAs to determine accurate home value, Clever Partner Agents know your local market. Complete our online form to get connected a top-rated local agent that will list your home with a discounted commission rate of just $3,000 or 1% for homes over $350,000. Partner Agents are well versed in comparative market analyses and will help you get the best selling price for your home.
FAQs about Comparative Market Analysis
How do I find comps for my neighborhood?
To find comparable listings to your own home, search your local MLS and real estate listing websites to get an idea of your local real estate market. Work with your listing agent to compile the asking price and sold price (if applicable) of homes in the surrounding neighborhood. You'll compare lot size, curb appeal, and other factors to determine a value estimate for your home. You may even want to drive around your neighborhood to see if there are listings with similar square footage to your own to use for your CMA report.
What are property comps?
Comparable properties (or comps) are properties similar to your own (if your home is a three bedroom, find one with the same) to help determine the value of a home and the listing price. By comparing property values of recently sold homes in your area, your listing agent (or an appraiser) can get the best idea of what your home is worth.