When putting your home on the market, it helps to have a general idea of what the property is worth, so you can attract buyers while still getting the best price possible. But if it’s been a while since you bought the home, it may be tough to know how much it’s worth in the current market. Performing a comparative market analysis (CMA) can help you determine a ballpark figure of what a fair listing price might be. Here is a look at how to do a CMA in real estate.
How to Do a Comparative Market Analysis (CMA) in Real Estate
1. Research the Neighborhood
The first step in doing a comparative market analysis is to evaluate the neighborhood. Is the area on the upswing, or have things taken a turn for the worse? Is it currently a buyer or seller’s market? Are there any nearby amenities or attractive features that would impact property values? All this information will help you understand the conditions in the local area, which will help you create a more accurate CMA.
2. Gather Available Listing Data
Next, you should gather all the available listing data on the property that will be the subject of your CMA. If this is your own property, this step will be easy, but it could be any property you want to evaluate.
Compile any relevant data, including the square footage, number of bedrooms and bathrooms, luxuries (such as a swimming pool, central air, tennis court, etc.), and past sales prices. The more data you can find, the more accurate your CMA will be.
3. Select Comps
Next, you’ll want to select your comps. Comps refer to comparable properties or other homes within the area that recently sold and are similar to the one you’re analyzing. So, if you are performing a CMA on a three-bedroom, two-bathroom home that’s 1400 square feet, look for other homes with the same number of rooms and similar square footage.
You can look for comps within the same neighborhood or in the surrounding area. But the closer, the better because if you stray too far, it will impact the validity of the CMA. You may not find any properties exactly the same but choose the closest 3 to 5 properties within the general area.
4. Adjust for Any Differences
Next, you’ll want to take note of any differences between the property you’re looking at and the comps you pulled. For instance, if the property has a hot tub and the others don’t, it may impact the value. So, take stock of any significant differences between the properties in your CMA.
5. Determine a Rough Price Per Square Foot
Using all this data, you should be able to determine a rough price per square foot. You do this by taking the sales price of each of the comps you pulled and then dividing it by the home’s square footage. Then calculate the average of all the properties together. Hopefully, the price per square foot for each property will be similar.
If they vary significantly, you should determine why that is and maybe return to the drawing board and choose new comps. While there will likely be subtle differences, the price per square foot should be relatively close if they are all similar properties in the same area.
6. Compile All the Data to Create a CMA
Using all that data, you can create your CMA and generate a rough estimate of the sales price. First, you should multiply the average price per square foot of the home you’re analyzing by the average price per square foot determined in the previous step.
Then you can make any adjustments you think are necessary to account for additional features or changes in market conditions. For instance, if the home you’re looking at is sitting on a larger lot than the others, you may want to factor that into the rough sales price.
Comparative Market Analysis Example
Say you want to perform a comparative market analysis on your own home. The first thing you should do is gather all the necessary information on the property, including the number of bedrooms and bathrooms, lot size, condition of the home, and any additional features you may deem relevant.
Write down all that information and search real estate listing sights for other homes that have sold within the last six months that are roughly similar to the figures you wrote down. But also include the sales price and the date of the sale. Then compile the information into a table like the one below.
|Your home||Comp #1||Comp #2||Comp #3|
|Date of Sale||N/A||4 months ago,||3 months ago,||5 months ago,|
|# of Bedrooms||3||3||3||2|
|# of bathrooms||2||2||2.5||1.5|
|Lot size||.5 acre||.5 acre||1 acre||.5 acre|
|Other features||Swimming pool||3-car garage||Fireplace|
Based on this CMA, you should expect your home to sell anywhere in the ballpark of $280,000 – $310,000. The average price per square foot seems to be around $200. Your property is most similar to Comp #1, although smaller. However, the swimming pool could bring in a higher sales price even without the 3-car garage. Comp #2 had a slightly higher price per square foot because it has an extra half bath and sits on a larger plot of land. But, comp #3 sold for less because it’s smaller and needed some work. You can add additional rows and comps to get an even more accurate. But this is generally how a CMA is calculated.
Do You Need a Comparative Market Analysis?
No, a CMA is not required, although it can be helpful. It’s not an official valuation, just a rough estimate of what a property may be worth based on available market data. Ultimately, a CMA cannot substitute for an official appraisal, nor will it determine what a buyer is willing to offer. But it can be a helpful guide for setting an initial listing price, which you can later adjust if it seems to be too low or too high.
Comparative Market Analysis FAQ
How Do I Get a CMA for My House?
There are a few ways you to generate a CMA if you want one for your own home. You could compile one yourself using market data that is available online. Websites like Zillow and realtor.com can provide the basic information you need to generate a CMA. It may or may not be accurate depending on the available data and the complexity of the analysis, but this can be a helpful way to find a ballpark figure.
The other option is to enlist the help of a realtor. Most realtors will gladly provide you with a CMA, especially if you let them know you’re thinking of selling your home. They will likely charge you a fee, but a CMA compiled by a professional using data from the MLS and other exclusive databases will probably be more accurate than what you could do on your own.
Are comparative market analyses free?
It depends. If you create one on your own, then it’s free unless you decide to pay for access to specific data. If you hire a real estate agent to generate a CMA for you, they will likely charge you a fee. Unless you agree to let them list the property, in which case they may provide a complimentary CMA.
What is the Difference Between an Appraisal and a Comparative Market Analysis?
A comparative market analysis is just a rough estimation of the property’s market value, whereas an appraisal is an official valuation completed by a licensed appraiser. Anyone with access to listing data can compile a comparative market analysis, but appraisers must fulfill specific educational requirements and obtain certification. As a result, a comparative market analysis cannot substitute for an appraisal when an official valuation is needed, such as when obtaining a mortgage. But it can give homeowners and agents an idea of the market conditions and how to list the property.
How Much is a Bedroom Worth in a CMA?
Typically, a bedroom will add anywhere from $5,000 to $10,000 to the home’s overall value, but it all depends on the neighborhood’s average price per square foot. The average price per square foot nationwide is around $184, but it’s nearly 10x higher in areas like Manhattan or San Francisco. So, the value of a single bedroom depends on how much square footage it adds to the home and how much more desirable it makes the property to potential buyers.
What Does a CMA cost?
A CMA from a realtor will typically cost anywhere from $50 to $300, depending on the area. But many realtors provide CMA’s for free for their clients or if they are interested in soliciting your business. So, if you call up a random brokerage and request a CMA, they will likely charge you a fee. But if you call and offer them potential business, they may provide one free of charge to entice you to give them the listing.