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?
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 feature differences, such as an added pocket. Now, imagine you got to the checkstand, 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 price, the clerk states that the minor feature 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 done 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 bang for your buck in the timeframe you want.
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 itself to see if the value of the property and the value of the structure itself is worth what the buyer is offering.
When there is a high demand for homes, houses in the area are oft times placed at a higher price point than the appraisal says the home is worth, meaning the buyer either has to pay the difference or find a new house.
What to look for in a CMA
Not all CMAs are created equal. If you genuinely want to get the best price for your home without waiting years 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 communities in the area of the homes you are comparing. Are the houses in that neighborhood in the same condition and have identical features to your home and neighborhood? The quality of the neighboring dwellings really goes far in adding or taking away value from your property.
Take a 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 make sure to compare homes that are most similar to your square footage .
Look at online listings of similar homes. Note the condition the house seems to be in based on the pictures, and the price per square foot, as well as the price of property taxes and any neighborhood perks, such as HOA or a gated community. Try to compare to the homes that are 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 it takes to do it, it may be one of those things you want to leave up to people who know precisely what to look for and can do it a lot faster. Whether you decide to do it on your own or call in some help, doing your due diligence before listing your home will save you a LOT of headaches and could even help you bring in a lot more money!
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