Comparative Market Analysis (CMA)

Comparative Market Analysis also known short as CMA is a report of market statistics that is prepared by real estate professionals, but it is not an appraisal.

What exactly is Comparative Market Analysis (CMA)?

The CMA is the process of gathering and analyzing the property characteristics of homes currently for sale, homes recently sold, and homes listed that did not sell. The CMA focuses on properties similar to the subject property in size, location, and amenities for the purpose of deriving a likely listing price of the offering price. It may range in the form of a simple list of recent sales with no adjustments to a detailed adjustment grid.

As your Real Estate Agent, I take an extensive approach to analyzing the market when pricing your home. Please, feel free to contact me today to request a free CMA for your home.

The CMA analysis is based on:

• Recently closed properties (sold),
• Properties currently on the market (competition for the subject property), and
• Properties that did not sell (expired listings in the area).

The CMA is a good indication of value only when comparables exist in a reasonably active market. I always ensure that the comprobable properties in CMA meet at least those four conditions:

• It is similar to your property
• If it is a sale, it has been sold recently (last six months up to a year)
• It is located in a similar location or subdivision
• It actually has changed owners as a result of an arms-length transaction

Reviewing actual sales prices of comprobable properties it will help you understand what actually buyers pay in the marketplace. Comparable sales data are important when financing is necessary because an appraiser relies on these data to estimate market value. Many sales are contingent on financing the purchase price, so it is important we do not overprice your property.

Reviewing the properties that are currently on the market is extremely important because those properties will compete with your listing. The principle of substitution (you can read my article about that here – Basic Principles of Value Explained) means that a buyer will select the property with the best price, all other things being equal.

Common Elements for Comparison

The accuracy of the comparable sales approach relies on the elements of comparison selected for adjustment.  Below is the list of the most common and significant factors that affect value in standard residential appraisals.

Location

Location is so important. Even within the same neighborhood, locations can result in significant variances. Here, in Breckenridge and Summit County we experience it all. Our resort and mountain community present many challenges. For example, one condo in the resort can be a true ski-in, ski-out property, but the condo in the building next door (less than half a mile) is not. Therefore, using a local agent from Summit County is extremely important. I am very familiar with all the neighborhoods and complexes in Summit County and it is essential knowledge when preparing for CMA.

Size and Shape of Lot

Irregularities can make portions of a site unusable for building, impair privacy, or restrict on-site parking, which could require major adjustments. Street frontage and total square footage are other important considerations.

Landscaping

Trees, plantings, and other types of landscaping are evaluated as to maturity, quantity, and quality.

Construction Quality

It is possible that the difference in quality might disqualify the property as comparable. In Summit County, we have a lot of luxury properties that are built with high-end materials and furnishings, so it is extremely relevant in our market.

Style

Generally, the style of the house follows the rule of conformity (a house should not be the only one of its type in the neighborhood). An important aspect of style is the number of floors of the residence. A one-story ranch house probably could be compared to a split-level. However, a three-story house is not comparable to a one-story house.

Design

The design must be viewed from both functional and aesthetic standpoints. Functional aspects include the existing traffic patterns in the house, the placement of doors and windows, room-to-room relationships, and the usefulness of rooms. Aesthetic aspects focus on how pleasant and attractive an interior appears to an observer.

Age

Because most subdivisions are built within a relatively short period of time, there may not be significant age differences among comparables. For example, most of the ski-in, and ski-out complexes in Breckenridge were built as the first one and at a similar time. A brand-new home is likely valued by the builder according to actual costs, overhead, and profit.

Square Feet of Gross Living Area

The square footage of the home is one of the most common factors taken into consideration because size differences among homes can be easily calculated. Appraisers normally do not count any floor area that is below grade as gross living area.

Number of Rooms

The total number of rooms in a house does not include the foyer or bathrooms and generally does not include basement rooms.

Number of Bedrooms

A major adjustment is made if the subject property and comparable property has a different number of bedrooms.

Number of Baths

Full baths (lavatory, toilet, and tube, with or without shower), three-quarter baths (lavatory, toilet, and shower), and half baths (lavatory and toilet) comprise this category. Modern plumbing is assumed, so it is taken into consideration if there are out-of-date fixtures.

Kitchen

• Location
• Counter space and storage
• Service triangle
• Appliances

The location of the kitchen is an important factor, based on its convenience to dining areas and accessibility for unloading groceries. The market will not accept a kitchen with inadequate counter and storage space. The service triangle is calculated by drawing straight lines connecting the refrigerator, range, and sink. Most consumer polls show that the total length of the three lines should be greater than 12 feet but not exceed 22 feet. Appliances represent a sizable portion of the home’s cost, and their age and condition are important.

Other Space

Unfinished attics, porches, utility rooms, enclosed sun porches, or any other room not part of the primary house are included in this category. If it is not heated it is typically not included in the gross square footage.

Garage

The garage is another important factor that will change and add to your home value.

How is Comparative Market Analysis (CMA) Different from Appraisal?

An appraisal is based on a detailed analysis of market conditions, the features of the subject property and comparable properties in the neighborhood, recent sales and listings, land value, and current construction costs – all the elements that the lender wants to consider in determining whether or not to make a loan and accept the property as security for the debt.

You can find out more about appraisal in this FAQ.

Free and Instant Home Value

In the meantime, before you receive a full Comparative Market Analysis from me, use this free and instant tool. This tool will calculate your home value in 15 seconds and you will receive a full report with comparable sales. Please, check your spam folder.  While you should not solely rely on this result, it is a great indication of your home value range.