What is a Comparative Market Analysis?
24 June 2010
To get the best price in the current market, you should have a comparative market analysis (CMA) done on your home. Real estate agents often offer CMAs as part of their services, usually for free. A CMA contains information about how much is being asked for homes on the market, prices of homes currently under contract but not sold yet, homes that have recently sold, and expired listings. All of the homes in a CMA should be reasonably close to the size, age, condition, amenities, upgrades, and location of your home. This information is then used to determine how much your home is likely to sell for in the current market.
Beware of recent inflated home prices affecting your expectations of what your home should sell for today. 2005 prices are not the prices of 2009 and 2010. In a market where prices can fluctuate based on seemingly unrelated events, it is inadvisable to use your purchase price to determine your selling price. In today’s “buyer’s market”, overpricing only means that people will ignore your home for something more reasonably priced. What you paid for your home means nothing in a buyer’s market; all people care about is how much homes are selling for now. If you really need or want to sell, you may be facing a significant loss. Accepting the possibility (or reality) of this will make it easier to sell your home for the best price possible. Getting a CMA done will give you and your agent a price that will likely be considered seriously by buyers.
Analyses can differ depending on a number of factors. The number of comparable homes currently on the market can be a lot different than the number of similar properties available a month ago. CMAs can also differ depending on the different characteristics of the homes compared. If you’re selling a 2 bedroom rancher with a 30 year old roof, likely it won’t go for as much as a 2 bedroom rancher with a 5 year old roof. If your home is exquisitely maintained, it will likely go for more than a comparable home that was advertised as a “fixer-upper”. Any upgrades or amenities that your home has should be included in the evaluation.
An analysis of your home is highly recommended if you want to sell your home for the very best price you can get for it. A CMA will help you and your agent evaluate your home and show you what homes like it are being priced for and what they’re selling for. Allowing for differences between homes and the markets, you should end up with an idea of what your home is presently worth.
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Tags: cma, comparative market analysis, home sales, property sales, selling real estateCategory : Investment
ACTV is "Active". The house is on the market, not under contract yet, and available for sale.
Mkt Tm: (Market Time)is the total days the property has been on the market
List Mkt Tm (ListMarket Time) – The days the current listing of the house has been active. For example, if the seller took it off the market then put it back on, or changed brokers.
In most areas a house must be off the MLS for 90 days or more to reset the Market Time count.
Talk to your Realtor about the info on the CMA, they'll be happy to explain it to you! (Heck, it's what we're here for!)
you can got to the registars office to see what has sold recently, and then try and look at the properties and prices. Sites like domania.com usually list sales, but they are slow by my estimation. Ultimately, if you have been watching the local market, you know what has been on the market and what has sold recently, so give more weight to those. If the pool is big enough, even an outlier that is missing will not change the story. There could be a reason that something sold really cheap, which would make your comp analysis misleading. tba
I would say use your realtor ….if this is the first time you have purchased a home. They can guide you about home inspections etc. However, if you have done this before then make your offer – zillow.com is a great site to get info. about housing prices and you don't have to be a realtor in the real estate business to access it – it will give you a very good idea of the townhome's value. Also, the home owner may have some room to negotiate her price – she may or may not have to pay a commission to her office for the sale of her own property. Remember, in every neighborhood there is a high and a low price – and the bank appraisal will save you if you were to pay to much – the bank won't give the loan because no other comparable property in the area sold for that price unless your "realtor" can prove it…and that is what the comparative
marketing analysis is used for.
Your question encompasses many vital elements that seem to be missing in the mainstream real estate arena. In my opinion it is the replacement of those with that of greed and incompetence that shares much of the blame for today's market. To answer your question item by item will take some time. I will amend this answer late today and provide some insight to as many as time allows. My previous answers to many questions should cover your inquiry in better detail. I would also submit that there are many good agents still in the business today. Sadly, most never realize their own agents competency, or lack of, until it's too late.
What are the elements of a well-structured offer?
What are the basic/essential elements of proper offer presentation?
What offer/presentation elements build value to a seller?
What/who is a pre-approved strong buying candidate?
How are list prices (typically) flawed?
How does [an agent] prepare a comparative market analysis to support an offer?
I will re-arrange your list order and try to blend it all into a easy reading response.
Not all agents present their offers, most fax and deliver them to the listing agents office. I have never, ever! subscribed to such a method. The best way to do the following topics are always performed in a face to face environment with the seller and their agent present. I typically include the buyers present as well.
What are the basic/essential elements of proper offer presentation? To properly present your offer is best compared to an attorney doing a closing arguement in a trial. The seller is the judge and the listing agent the jury. Your client needs to be found as not guily of failing to be the best buyer. Present a solid case for your client as the best buyer without making the offer amount the largest hurdle. I present offers from back to front and close with the purchase price. This gives the seller a reason to pay attention to the deal before focusing emotionally on the price.
What offer/presentation elements build value to a seller?
A well educated buyer knows whats for sale elsewhere. Based upon the value expected for the typical price in the area their offer is reflective of the current market. The opinion of value is only that, an opinion. Without a concurring appraisal, the list price and sales prices are not as relevant as many sellers think. Agent's price homes for many reasons, often the most correct price opinion given by an agent before a seller lists, costs that agent the listing. This dynamic can also work the other way, some homes are drastically underpriced and undermarketed. I look for these situations as they scream out desperate seller with pushover agent.
What/who is a pre-approved strong buying candidate?
I always pre approve buyers and show them homes that fit within their buying power based upon current fixed rate loans.
I insist on a strong ernest deposit but use a note due within 24 hours of removal of the inspection contingency. I show a copy of a certified funds cashiers check for the same amount as the note as an exhibit. This way the buyers funds are not tied up during any potential disputes that arise from an inspection. Make sure you protect your buyer with several safe harbors and explain those clauses. The seller see's the cash is there otherwise. I also include a second exhibit that is a copy of an additional cashiers check for the buyers down payment based upon the good faith estimate /closing statement. Another item of interest here is that I have the approx sellers net proceeds calculated for them as well. I prepare that from looking at the sellers loan balance on the title report. I pull title before writing any offer, by the way.
I include a new CMA for the seller to view that is more current than when the listing was taken. I point out in it how list prices are flawed by the following;
Pricing up to get a close offer, this means the seller is thinking they will not get a full price offer. They know their priced wrongly so why reward them for agent incompetence.
Agents inflating a price to impress a seller, this is known as fluffing a price. In time the seller will be open to a reduced price.
Out of area agents pricing the home based upon a different neighborhood market.
Inexperience, listing with a friend in real estate, and basing list price on that house down the street that sold.
There are more reasons but the above are the most common.
The fact of the matter is as follows, every house is different even if built by the same builder. A commonwall duplex will be different condition wise unless brand new. No two homes on the same street are exactly the same within a few years. No two home buyers are the same in tastes and expectations either. A properly prepared and priced home will sell, but not have the same opinion of value equally amongst any current buyer pool. If you are looking for a low ball offer to appear stronger then use the comps that were well underpriced. I know my market very well and use a listing history search on some comps as this can help in several ways. The seller might remember the house on the corner that was listed for 300K and sold. They will say "Well that corner home sold for 300 thousand. They might not know it actually sold for 265K because they based their price on a flier they pulled 3 weeks ago at the corner house. I show actual sales prices and market time for every comp used that fits my arguement.
Building value to the seller thus is a blend of the following.
Show credibility and skill in your ability to present the true market. Never ever attack the sellers vanity, just educate them in a polite and professional manner. By presenting a market abstract and having them quietly questioning their price (Objective 1)you can then present your buyers strengths (Objective 2). Go over the ernest money agreement back to front as soon as the first two objectives are met. Make sure the offer is void of typo's and never get too far out on a limb on addendums or added conditions. Explain your requests in simple terms. Close with "Based upon the homes we have viewed and the opinion of value they have set, (as you hand them page one showing the offer amount) my clients feel this is a fair and accurate offering price for your home. After they confer with their agent and you return, they will tell you what it will take to buy their home. I have never writtren a full price offer and have had strings of over 100 offers in a row accepted.
That is a process where you compare a business to similar businesses in the same area. For example, if you are thinking of opening a Starbucks franchise near you, you would need to find out such things as what the traffic is, where the next nearest Starbucks is, how many customers you would need to break even, what other coffee shops are nearby, etc.
This is part of the process to determine if the idea of buying into the franchise makes sense economically
Your best bet is to check with the Realtor that gave you the CMA. But here's my guess…
Stat = status. Is this property actively for sale, under contract, sold, expired, etc.
ACTV = Active Status. It is currently for sale
Mkt Tm = Market Time. The number of days the property has been actively for sale.
List Mkt Tm = Listing Market Time. This one I'm really guessing about. It could be how long the property has been listed for sale but with any status. Maybe it was under contract and it fell thru, maybe the owner took it off the market to do some repairs and then put it back on. That would create a new market time but still under the original Listing?
The Realtor can also tell you the history of the property, like if it was under contract previously and didn't work out, etc.
I am not one for playing games, and that is a phrase worth repeating with your bid. Offer $230,000. They may counter offer at 240 or so, but you can counter back at 230 as many times as you wish. Let them know that 230 is your "best and highest" offer, and that if they do not accept it then you'll just go on to one of the many, many competing home for sale
Make sure you include an updated preapproval so they know that they have a bona fide qualified buyer who they ought not let get away for anything.
You can start lower and negotiate up in case you're curious to see if they'll take a lower offer, but once you get to 230 that is the phraseology to use. "Best and highest." It is far more business like than "take it or leave it."
You can bet that 249 is the price with a little negotiation built in, so you have an excellent shot. Good luck.
show how your neighbor in the same house as your pays less
First consult a Realtor that knows your neighborhood well (sometimes a good way to find this out is to pay attention to local listings and who that Realtor is on those listings). Find out what marketability is right now, if you don't have to sell, don't. You are not likely to get what you should for your home, values are low right now (product of supply and demand) and rates are at a peak point, soon to come down,