|Posted on September 23, 2020 at 4:00 PM|
Whether you are a buyer or a seller, and whether you plan on hiring a Realtor or doing everything by yourself, you probably know that home prices vary a lot. So, what is that variation based on? Usually, it is based on the home's location, when it was listed, how long has it been on the market, how many rooms and bathrooms it has, what is the condition of the interior and exterior, etc. So, as a seller, how are you supposed to price your home? And, as a buyer, how do you know whether a home you are interested in buying is priced correctly? By understanding the comparative market analysis, or the CMA, as real estate agents like to call it.
Simply put, a comparative market analysis is there to help you estimate a home's value in the best possible way. Thus, if you are interested in finding out more about what comparative market analysis is and how it is used, keep reading.
What is Comparative Market Analysis?
To best understand what comparative market analysis is, let us first mention the COMPS or the comparables. If you are a seller and you want to price your home, you would start with the comparables. These are recently sold properties that are located in your neighborhood (or close to your home), and that have similar features to yours.
For example, let us imagine that your home has five bedrooms, two bathrooms, a garage and a yard, and it is around 1,500 square feet. Now, let us imagine that your neighbor down the street also has a home with similar features, and it was sold for $ 300,000 a couple of days ago. Guess what - your homes are comparables, and they are worth the same amount of money.
CMA examines and compares the COMPS, which should ideally have the same features as your own home. Things like location, square footage, number of rooms, and bathrooms should be relatively the same for CMA to yield positive results.
How to Run a Comparative Market Analysis?
If you need to sell or buy a home quickly and get ready for the move in no time, it would be best to hire a real estate agent. He or she, being a professional in their field, will be able to gather all the necessary information and run your CMA while you are packing up your boxes. But, if you want to do a real estate CMA by yourself, here is a simplified DIY:
● Step 1. Gather all the necessary property data: First, try to learn as much as possible about the property you are planning to buy or sell. For example, make sure you know all about its location, acreage, square footage, year of build, the number of bedrooms and bathrooms, recent remodeling jobs and valuable home improvements, interior and exterior finishes of note, special features (swimming pools, barns, garages), tax information, etc.
● Step 2. Check the quality of the neighborhood: The location of the neighborhood is a factor that will determine the price of homes in that particular area. That is why homes in Manhattan are more expensive than those in Brooklyn, for instance. But, besides the actual location of the property, your CMA should also include things like proximity to all the necessary amenities like schools, banks, office spaces, city centers, beaches, parks, etc. And it should also include proximity to unpleasant features like factories, highways, and garbage dumps.
● Step 3. Search and find real estate comparables: Now that you have all the necessary data, you must find homes with similar features to yours or others sold at the moment. Let us mention once again - you must compare apples to apples, not apples to pears if you want to sell/buy quickly and successfully, and call homegrownmoving.com to relocate you.
● Step 4. Calculate the price per square foot: This is the easy part! All you have to do is get the average price per square foot of the comparables you found and divide its selling price by its square footage. This is how you get a reasonably accurate price for the home you either plan to buy or sell.
● Step 5. Adjust the home's value based on the property differences: No two properties are entirely the same, no matter how similar they appear. For instance, even if all the rooms in two different houses are the same, those that have been recently renovated or have some newer features will change the CMA, thus the home's final value. It is all about adding or subtracting value for structural differences.
Why Should You Ask Your Real Estate Agent for a CMA?
There are many reasons why you should hire a real estate agent and get a comparative market analysis from them. Firstly, you will not waste your time and energy researching the market. Secondly, you will not waste any money, as all real estate agents offer CMAs for free. Thirdly, you will not have to reevaluate your price many times because you are not sure whether you have done everything right. And finally, there is a way for you to get as much as a 15% rebate of your agent's commission after the transaction is complete.
Future buyers and sellers are advised to ask for CMAs when meeting with potential real estate agents. This is the best way to see which agent did its homework and knows the market well. This will ensure that you get the best possible price for the property you want to buy or sell and get a good deal from your real estate agent. Do not hesitate to conduct interviews with several agents until you find one you want to work with.
Written by: Lisa Robert with US Moving Experts