A comparative market analysis (CMA) is a data-driven report on the estimated value of a property. A powerful sales and marketing tool, CMAs benefit all parties involved, from interested buyers to potential sellers to agents who want to demonstrate their expertise and professionalism.
Creating a CMA is simple, especially when you follow our six easy steps. The result is a valuable asset that will help you stand out from the competition, assist and impress your clients, and close more deals.
Find It Fast
What is a comparative market analysis (CMA) in real estate?
A CMA assesses the estimated value of a property based on past and current prices of similar properties in the same neighborhood. A CMA evaluates many factors, including a property’s size, location, and condition, to determine the most accurate market price. Buyers, sellers, and agents use these reports to agree on a final sales price.
A CMA is not a formal appraisal. While agents conduct CMAs using data, their experience, and instincts, an appraisal is performed by a licensed professional to determine a property’s value for a lender or insurance.
While no one can claim that real estate CMAs are unfailingly accurate, they offer thorough insight to sellers, buyers, and real estate agents. An agent-prepared comparative market analysis certainly provides more precision than the market value estimations from most home value estimators (like Zillow).
Why use a comparative market analysis
A real estate comparative market analysis benefits everyone. Sellers gain a deeper understanding of how much their property is worth in the current real estate market. The CMA helps buyers who want the best property at the best price adjust their budget, raise enough funds to purchase, and amend their ROI expectations if it’s an investment. An accurate CMA makes it easier for real estate agents to lay out their arguments for a recommended listing price or advise buyers that an asking price is fair or can be negotiated.
Creating a CMA is surprisingly easy but takes time and research. Busy agents who want to skip to the head of the line can use Luxury Presence’s custom CMA tool, one of the many digital presentation resources that elevate an agent’s marketing and sales strategy.
How to conduct a CMA in 6 Steps
1. Gather data on the property
Create a comprehensive database of property information. The property’s listing document is a good start, but collect additional details such as the current tax rate and historical improvement permits, which you can find through your local government administrative offices.
Gather reliable information about the property’s ownership and sales history, specifically, how the price of the property has fared over the years through changing markets. Has the property’s price followed or deviated from the industry trends over the years? Did the ownership change a suspicious number of times over the years?
Conduct a detailed assessment with this data:
- Year built
- Square footage
- Number of bedrooms and bathrooms
- Location details
- Acreage of the lot
- Assessment of the architecture
- Evaluation of interior finishes
- The amenities in the property
- Details of the improvements done
- Tax bill from the previous year
- Overall condition of the property
- Sales and pricing history (+ possible explanations for any deviations from market trends or excessive ownership changes)
2. Collect details of similar sold properties + active listings
Establishing four to six comparable properties (comps) will aid you in establishing an appropriate, market-based price for a property. While you can make necessary adjustments in a following step, ensure your comparable properties are as equivalent to the principal property as possible.
Start with recently sold comps in the same (or similar) area of the property you want to sell. The more similar the properties, the better and more reliable the comparisons to your property will be. Here are the criteria you should consider for comps:
- Sold within three months to one year from the current date
- Located in a similar location or neighborhood
- Performs well with a short listing-to-closing window
Also, gather in-depth analytics on active listings, which provide insight into buyer behavior and trends. Consider what properties are languishing on the market and why. Don’t forget under-contract listings that are pending.
Finding similar properties for comparisons may be challenging if your property has unique traits that are hard to quantify. Special features will require you to perform additional research to value them effectively. Finding and assessing accurate comps is a skill. Instead of picking the first three that appear similar, do a deep dive into the available data and find five or six properties that can give you (and your clients) real insight into the property and the local market.
3. Compare your property with similar properties
Start with your property and analyze its historical value. To arrive at an approximate current price, contextualize the industry trends and the overall percentage of value increase in the industry.
Next, compare the prices of similar properties sold in the local market in the last year. You can reduce the window to three to six months if the industry has been particularly volatile.
Last, the current market needs to be assessed to understand how similar properties perform. Don’t forget to consider all relevant information. One of the most significant differences between your CMA and a tool like Zillow’s Zestimate is that you have all the relevant intel. As the local expert, you know a property might be worth more in your market because of the schools, a new hot restaurant, or a possible zoning change.
Finally, create a general price range for your property based on historical sales, recent local sales, and existing listings. Rank these prices from lowest to highest to get a comprehensive price range of the property.
4. Adjust for the differences in your property
In a perfect world, your comps are so perfectly aligned with your subject property that you don’t need to make any adjustments. But, if your comp properties differ (for example, more or fewer bedrooms, different amenities), you’ll need to make price adjustments. If your subject property has one more bedroom than the comp property, your property should be priced higher. Similarly, reduce the estimated price if your property has one less. This step requires a bit of finesse on the agent’s part, but the idea is that all things are equal (even if through adjustments), and the pricing of your property is on par with the comps.
5. Consolidate your data
Finish up your calculations by finding the average square footage and creating a final price range for the property. The range will help sellers understand aggressive versus conservative pricing and show a buyer where there is room for negotiation.
Because the CMA considers many factors and largely relies on an agent’s expertise and instinct, CMAs for the same property can differ. That’s ok. While the market will ultimately dictate the price, your comparative market analysis is a valuable tool that enables your clients to make the most informed real estate decisions.
6. Present your CMA
You’ve collected your data, performed your analysis, and perfected your pricing strategy. But how you present your CMA matters—it’s easy to overwhelm your audience with graphs, charts, and spreadsheets. Luxury Presence knows busy agents don’t have the time to design a digital CMA presentation, so we’ve done it for you, and with our signature, award-winning style.
Our presentation builder tool allows agents to effortlessly compile their CMA data into a user-friendly, sharable, beautiful, memorable, and brand-differentiating platform.
And yet, we take it one step further. Luxury Presence can create custom CMAs by pulling relevant data directly from your MLS. We then input it into one of our stylish designs, and the result is a comprehensive, accurate, and reliable report that will stand the test of any buyer, seller, or refinancer.
Example of a comparative market analysis
The Cooper family is interested in buying a four-bedroom house with 2,000 square feet. They are considering a property listed for $400,000. However, they would like to make a lower offer. They ask their real estate agent to conduct a CMA to assist them in negotiating a better price for the property.
The real estate agent collects the following details about the subject property that interests them:
- The house is in excellent condition with all the amenities a family needs.
- The house has four bedrooms, three full bathrooms, and a half-bathroom.
- The house has a fireplace, a two-car garage, and a fully-finished basement.
- The house sits on a half-acre lot in a great location.
- The house is 2,000 square feet.
- The location has many houses with similar square footage.
The agent finds four different houses with comparable features and areas. One appropriate comp has an additional bedroom, no basement, and sold for $400,000.
The agent calculates that the additional room adds $5,000 to the house price and adjusts the comparable price to $395,000. As the house does not have a finished basement, the agent adds $3,000 to the home value. The value of the house now adds up to $398,000. The agent goes through the same process with the other comparable properties.
Once the agent completes the evaluation of the properties, the agent calculates the average square foot value of the property and finds that it is $190. Using the same figure, the agent multiplies the property’s square footage, 2,000 square feet, to get the final listing price of $380,000.
The Coopers can now confidently decide to offer $380,000 for the house. Since the offer is appropriate based on the comparable houses, they have an excellent chance of having their offer accepted.
Luxury Presence + a real estate CMA
CMAs enhance your business and serve your clients by providing critical, expert information for buying and selling property. A well-prepared, thoughtful, data-driven comparative market analysis creates an excellent impression of your expertise and reputation as a real estate agent. Take the above steps to conduct a CMA that supports your clients in making the best, informed decision possible.
Don’t have the time? Let Luxury Presence do it for you.
