What is a Comparative Market Analysis (CMA) in Home Buying and Selling? 

 March 2, 2021

By Scott Teesdale  

minutes read time

A Comparative Market Analysis (CMA), also called a Competitive Market Analysis or Comparable Market Analysis, estimates a property’s value based on similar or comparable properties (comps) sold in the same market. A CMA is an important document that a good real estate agent will create for their clients when deciding on a fair list price for their property.

The document (CMA) is part of the property valuation process, and it tells sellers everything they need to know to avoid home selling mistakes. This makes it a top tool for home sellers seeking to analyze similar homes’ sales activity in the same neighborhood or market area.

Why do sellers and buyers need a CMA?

A CMA compares multiple homes and tells sellers what price range their home belongs to. Whether a property is a high end or low end depends on several factors unique to the property itself. And a killer CMA can help a buyer determine the ideal price for a home.

Sellers and buyers use CMA to get an idea of the market climate. The main reason a buyer or seller would get a CMA is to determine the fair market value (FMV) of the featured property. 

  • FMV will help buyers know what type of offer to give.
  • FMV will help sellers determine what to price the house at. 

The market insights gained using CMA helps sellers understand the market trends. This helps them respond to offers intelligently.

How to create a market analysis

A comparative market analysis can be created by listing agents, independent appraisers, sellers, and mortgage lenders.

Homeowners who have considered listing their home with their seller’s agent may have a few questions about the process. For example, how will a local real estate agent come up with a fair price for a home?

Here are steps to follow when creating a market analysis:

  1. Collect detailed information about the subject property
  2. Gather local property tax information
  3. Collect the subject property’s previous listing information
  4. Analyze the recent comparable properties
  5. Examine similar homes currently for sale
  6. Assess the micro-market trends of the subject property
  7. Compile and compare pieces of the comparative market analysis
  8. Package the results

Factors to consider when pricing a home for sale

Listing agents perform a CMA to determine the highest and lowest price point of a home. Because no two homes are exactly similar, neither is their pricing.

  • Square footage and acreage
  • Year built
  • Location (county, street, municipality, neighborhood)
  • The number of bathrooms and bedrooms
  • Recent renovations or updates
  • Amenities that set the property apart from other comps
  • Interior finishes that might add or lower the value of the property
  • Any extraordinary features (pole barn, swimming pool, and so forth)

There are many factors that a real estate agent considers when completing a CMA to help determine what a home will sell for. Standard CMA reports, for example, tend to contain the following data:

  • Active listings: Active sale homes are listings currently for sale. These homes matter only to the extent they are a home seller’s competition for buyers. They are not a reflection of market value as sellers can ask whatever price they want for their home.
  • Pending listings: Pending listings are formerly active listings that are under contract. Since they are not yet closed, they are not a comparable sale. Therefore, these listings do not indicate market direction either.
  • Sold listings: Properties that have closed within the past three months are a great comparable sale. These are the homes a listing agent will use when appraising a property for the buyer, together with the pending sales.
  • Expired listings: These homes indicate the maximum median sales price since they were not sold and were possibly unreasonably priced. Listed properties also expire because homes needed repairs or because they were not marketed aggressively.
  • Canceled/off-Market/withdrawn: These are homes that were removed from the market for various reasons. The common reason properties are taken off the market is because the prices were too high.

Real estate agents prepare CMA reports for their customers, usually using data comps obtained from a local multiple listing service (MLS).

Reports can vary, from a single-page list of similar home sales to a several-dozen pages comprehensive guide. The length and complexity of a CMA report often depend on the agent’s business practice.

CMA can also be supplemented with tools such as Zillow’s Zestimate to find home facts, location, and market. This will help sellers and potential buyers to estimate the market value of homes quickly.

Bottom Line

Setting a fair price to both parties is one of the best things sellers can do to turn buyers’ heads. If a home is priced too high, it will likely be skipped over by buyers in favor of other listings that offer more for the price.

However, when a property is priced fairly, buyers tend to want to view it because they feel that they are getting their money’s worth. The more views a home gets, the more likely it is to receive an offer.

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I use data and technology to help Millennials navigate the ins-and-outs of buying or selling a home in today's market. From appraisals to mortgages to zoning, I cover it all with the goal to teach others. Connect with me on social via the icons above.

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