Sellers, Here’s What You Need To Know About The Comparative Market Analysis (CMA)
When you hire a real estate agent to help you sell your home, one of the things that they will do for you is to help you decide on the correct listing price for the property. However, many sellers wonder just how they go about deciding on a correct price point. The answer is simple: it all comes down to a marketing tool known as a comparative market analysis (CMA).
If you would like to know more about what a comparative market analysis is and how it works to help you sell your home, read the post below. This post will fill you in on the ins and outs of this important document.
What is a comparative market analysis (CMA)?
At its core, a comparative market analysis is a marketing tool that real estate agents use to help you determine the fair market value of your home. The fair market value, as you may remember, tells you how much your home is worth in the current real estate market.
A CMA does this by comparing your home to other, similar homes that have recently sold in your area, known as “comparables.” Ideally, a CMA will include three to five similar homes that you can compare to your own.
By comparing your home to similar ones that have sold, you’re essentially using their sale prices to inform your own. You’re seeing how much buyers have been willing to pay for a similar product and using that information to set the price range into which your listing will fall.
Why is a CMA an important tool when marketing your home for sale?
Some sellers may wonder why it’s important to use recent sales as the basis for your list price and not what you paid when you bought your house or the amount that you still owe on your mortgage. Since the real estate market changes all the time, unfortunately, it may be worth something different now than what you paid for it years ago. Recent sales show you what your home could be worth to buyers currently.
As for why it’s important to price your home correctly for the current market, that’s one of the best things you can do to sell your home fast. When properties are priced correctly buyers feel that they are getting value for their money and are more likely to make an offer.
Conversely, when a home is priced too high, buyers see it and think that they can get more value for their money elsewhere. These homes tend to sit on the market longer without much interest. Then, when a buyer does eventually come along, they assume that they have room to negotiate because the listing has not had much traffic.
What factors should you take into consideration when reading over a CMA?
All that being said, in settling on a price for your home, you’ll want to compare your property to the ones listed on the comparative market analysis in order to see how it stands up to the competition. While you’re doing that, you should look at several different factors for each property. They are as follows:
While every home listed in your CMA should be in the same general area, they should at least be the same zip code and school district. Still, some neighborhoods are higher-value than others. With that in mind, take a second to consider how home values compare in your location versus the one where the home in your CMA is placed.
Comparative market analyses include pictures of each home for a reason. They’re there to show you the condition of the property. Ask yourself how the condition of your property fares in comparison and be honest about the answer.
If, for example, your home is in better condition than the one you see on the page in front of you, that may call for a higher list price. If, on the other hand, your home needs a lot more TLC, you may need to price it lower in order to compensate for the work.
Put simply, upgrades add value. If your home has a slew of features that the other properties in your comparative market analysis do not — for instance, a deck or upgraded kitchens and bathrooms — then you can rightly expect to garner a higher sale price. However, if your home is missing some features that most of the other homes in your neighborhood have, you might need to settle for a lower list price.
4. Square footage and lot size.
As you might be able to guess, the more space a home has to offer, the more you can expect in a sale price. Be sure to compare both your interior square footage and your exterior lot size to the other homes on the list.
Once you’ve compared your home to the other properties on the list, you should have an idea of where your home will ultimately fit within its price range. Use the knowledge you’ve gained from looking at the CMA to set a list price that’s fair to both you and the buyer,