Eleanor is a copywriter, creative, and mac and cheese enthusiast.
If you’re getting ready to buy or sell your home you’ve probably heard about a Comparative Market Analysis, or CMA, from your online research or your realtor.But if you’re still wondering exactly what that is, you’re not alone.
What is a CMA?
Exactly what it sounds like – an analysis of comparative homes on the market. It evaluates a home’s value by looking at similar, recently sold homes in the same neighborhood called comparables. A CMA helps sellers figure out how much to price their home and helps buyers figure out how much to offer on a home.
A CMA is not the same as an appraisal. A CMA is prepared by a real estate agent. The information comes from the multiple listing service (MLS), which contains a pool of data shared by agents and brokers including information on listed properties for sale, sold data, historical trends, and property tax roll data. Then, based on the current market, agents can help you price your house or determine an offer amount on a home.
When a buyer applies for a loan the bank will order an appraisal, which is performed by a licensed appraiser. The appraiser will visit your home and compare it to similar homes, property tax records, and recently sold properties. They also us the MLS. This protects the bank from loaning too much money for a single property.
What is a Comparable?
A good comparable for your home should be another home that is similar in square footage, age of construction, location, and amenities upgrades, condition and location.
Appraisers will compare houses based on their square footage, and while the age of the home doesn’t have to be exact to other comparables, they should be within a few years of each other.
We all know that location is everything. For example, homes on quieter roads tend to sell for more than a house on a busy street. If you live in an ‘undesirable’ location such as close to train tracks or near a highway compare your home to those in similar locations.
Value is added or deducted depending on the kinds of upgrades your home has. A home with a swimming pool will have a different value than a home without a swimming pool. A home with three bathrooms is worth more than a home with two bathrooms.
What Kind of Information is in a CMA?
In a standard CMA you’ll find data on active listings, pending listings, sold listings, expired listings, and off-market, withdrawn, or cancelled listings.
Active listings are other homes that are currently for sale. If you’re trying to sell your house then these listings are you competition.
Pending listings were active and are currently under contract but haven’t yet closed and therefore are not a comparable sale (yet). You won’t know the sold price until the transaction closes, but pending listings can be fair indicators of the direction the market is moving.
Sold listings are homes that have closed within the last three months. If there aren’t enough home sales in your area to create a decent report you can look at the past six months of sales. Sold properties and pending sales are what an appraiser will use to determine the value of your home.
Expired listings are typically poorly priced at an unreasonable rate. Listings might also expire if the property is need of repairs or if it wasn’t aggressively marketed. Sometimes expired listings will come up as an active listing if it’s listed by a new agent at a new price.
Off-market, withdrawn, and cancelled listings are any properties that are taken off the market, which can happen for all kinds of reasons. These reasons might be seller’s remorse, too highly priced, too many days on the market, repair requests as a result of a buyer’s home inspection, or being unhappy and firing their agent.
Now that you know all about what a CMA is, are you ready to make an offer on your dream home? If you’re not sure how, we’ve got a blog post for that.