What
you should know about A Comparative Market Analysis:
The housing market is ever changing. A Comparative Market Analysis, or CMA, is an evaluation of similar homes that have recently sold, or are for sale in a specific area. A CMA is very important in terms of accurately pricing a home for sale if you are a seller. A home priced too high will not likely sell and a home priced too low is just throwing away dollars to a seller. Equally important, for a buyer, a CMA will help determine its affordability and its mortgage financing.
It is important when developing a CMA to compare similar homes, which are often called "comparables" or "comps." These would be homes of similar size, condition, age, and style in a specific neighborhood. These key elements are used to determine an estimated fair market value of a home.
This is part of an on-going series of real estate articles by Nick Santoro and Joe Santoro of Personal Property Managers who service Pennsylvania and New Jersey and specialize in real estate, home content downsizing, property management and estate sales. These tips and insights are especially important and true in the environment we are in today, with the global economy turned upside down, massive job losses, and the need for extreme social distancing due to the Corona Virus, which causes the COVID-19 disease.
A CMA, which should be completed by your real estate agent or a licensed appraiser, is an effective tool for sellers when determining what price to list your home for, and for buyers, to check the value of the home before submitting an offer to purchase. A CMA is also an important tool the lenders will use in evaluating the value of a home and thus an approved mortgage valuation.
A CMA is more than just looking at numbers. Knowing
something about the dynamics of the market that you're buying or selling
in, and why one house on one street might sell differently; for more
or less than a comparable house on another street, even in the same
town - is instrumental in making evaluations of price based on the
information presented.
When selecting comparable properties for a subject property, there
are many important aspects to consider.
First, sales that are far above or below the group of comparable are suspect, with likely valid reasons for the difference, yet not a good "comp" for your subject property. If there are enough recent comps, disregard the "high" and the "low" of the group.
Next, comps should be pulled from the subject property's area, or as close as possible, to get the most accurate neighborhood value. The most effective ‘comps’ are derived from similar homes within the same community or development, within close proximity and also factor in the property overall condition, upgrades and or work needed on a home. Today’s buyers are very different vs years ago and are very hesitant to invest lots of money into a home that requires significant updating.
When possible, use similar type construction properties to compare your subject property to. For instance, if your subject property is a single-level style ranch, look for other, similar homes, rather than a 2-story Colonial style home, to compare it to within the same geographic area and withing the same community. .
Finally, use sold listings that are as recent as possible. Markets change quickly, and what may have been the "right" price six months ago, may not be the case in today's market. Sold properties are a more accurate depiction of the value of a property rather than listed homes for sale.
Another aspect of a CMA is comparing what is currently active and on the market with your subject property, in real-time. Knowing that some of the highest sold comps will come from periods when there was less inventory available, or that lower comps might come from a time when there was a higher inventory, your list price as a seller (or offer price as a buyer), might need some adjusting based on how the market is performing now - rather than what it was doing when the comps sold in your CMA.
For example, if you're in a market where there is a low inventory, and prices are being driven up higher, as a buyer, you may think twice about offering a lower price for risk of being out-bid by another buyer. As a seller, if prices are moving downward, your house may sit on the market because it's priced too high for today's market.
When comparing properties, there will always be differences. Adjustments can be made to a subject property's value estimate for differences in land size or acreage, features (such as the number of bedrooms and bathrooms, garage or not, etc.), or any financing differences that could have impacted sales price (like distress sales or family sales, for instance).
It's a well-known saying, because it's true: "real estate is local." Being educated about the local market, and choosing the most appropriate comparables, is key to having the most accurate comparative market analysis possible.
More information can be found on who we are and Understanding market Comps via these brief video links.
For more insights, tips and videos please visit our Resource Page in the About us tab.
For more information on real estate or home downsizing please contact Nick Santoro or Joe Santoro of Personal Property Managers at 215-485-9272 or 908-368-1909. Personal Property Managers specializes in helping home owners transition from their home of many years into a new community. Personal Property Managers services Pennsylvania and New Jersey and offers downsizing services, estate sales services, home staging, discount full service real estate services via its association with EveryHome Realty. Learn more about Personal Property Managers from our recent News Stories.
