A home is most likely going to be the largest single investment in your life, so when it comes time to sell it, you should make sure you’ve gathered all the relevant information you can.
After all, you can’t confidently set a reasonable price for your home until you have an accurate idea of its value. So how do you establish that? Well, there are a few ways, and the best one is the Comparative Market Analysis (CMA).
What Is a Comparative Market Analysis?
The Comparative Market Analysis is more or less what it sounds like; it establishes the value of your home by comparing it to similar homes that are on the market or have recently sold. It takes into account various data points about your home, finds similar properties, and uses the selling or asking prices of those homes to produce a reasonable market-supported price for your home. In theory, that price will be very close to what potential homebuyers will be willing to pay for your home.
How Is a CMA Different from an Appraisal?
A Comparative Market Analysis provides something closer to the objective value of your home, since it uses real market comparisons. Appraisals can be very accurate, but there’s always going to be an element of subjectivity there. For example, if you hire ten different experts to appraise your home, they’ll come up with ten different numbers - and the range may be wider than you think.
What Factors Does a CMA Use to Determine a Home’s Value?
A CMA will consider many different factors and will weigh those factors differently, in setting your home’s value.
Some of them are:
The analysis will look for properties in areas similar to yours when it comes to access to amenities, mass transit, schools, tax assessments, etc.
The analysis will compare your home to others of similar size and square footage, which can be more accurate than using a simple “price per square footage times square footage” formula, considering that the price per square footage decreases as a property gets larger. Ideally, the comp properties will be with 20% of your home’s square footage.
If your home has unique features or amenities, the analysis will seek out properties with the same features.
The condition of your home is an important consideration and can have a substantial impact on the valuation. If there has been significant deterioration or repairs are needed, this will be taken into account.
Recency and Length of Time on the Market
Digging deeper into the data, the CMA will weigh more heavily sales from the previous 90 days, as those numbers will be more accurate. It will also look at how long a similar property sat on the market at its given price.
If it languished on the market for longer than average, that’s a pretty good indicator that the price was set too high.
Is a CMA Superior to Online Valuation Tools?
A popular alternative to a full Comparative Market Analysis is the use of various online valuation tools offered by lenders or real estate sites. (According to some surveys, a little over a fifth of homeowners use these tools to determine their home’s value.)
These online valuation tools are a type of automated valuation model (AVM) that combine public records like tax assessments, property records, and deeds of ownership with proprietary algorithms to predict your home’s value. Different lenders and real estate companies use different algorithms, which can lead to a wide variation in results.
When you get an AVM for your home, it may come with a “confidence score” to indicate how close it likely is to your home’s “true” value. For example, an AVM number with a 90% confidence score is, in theory, within ten percent of your home’s true market value. While that may sound like a high degree of accuracy if we’re talking about a potential $1 million house, that 10% of ambiguity could equal $100,000 of value.
Where the AVM uses algorithms and data to “predict” your home’s value, the CMA is based on real sales and listings; in the end, the CMA is probably going to give you a more grounded, accurate idea of your home’s value.
Of course, the best way to put together a smart pricing strategy for your home is to consult an experienced real estate agent. Our Clever Partner Agents are all full-service low-commission flat-fee agents who are top performers in their markets. Contact us today to get started, and we’ll even do a Comparative Market Analysis on your home for free — with no obligation to sign!