You’re ready to sell your home, and it’s time to get down to the business of pricing. With all the property information available online these days, what does a comparative market analysis (CMA) do — and will you need one if you’ve already got a listing price in mind?
In short, a comparative market analysis is an instrument real estate agents use to determine an asking price for your home. When you receive a CMA, it will likely be in the form of a thick physical or digital packet featuring charts, facts, figures, and photographs of houses.
Done right, a CMA weaves together key pieces of information, including the sale price of other nearby homes and local trends for your market, to offer a complete overview of all the variables that could impact your home’s value. If you’re unfamiliar with this industry-standard tool for pricing real estate, consult our list of the top 5 things you can expect a CMA to deliver on.
1. Put your home in a broader market context
You know your house inside and out — the good, the bad, and the ugly. You could name the sturdy material of your roof, discuss the lovely sunroom out back ad nauseum, and are used to warning guests of the bedroom door that has never shut quite right.
But even with this intricate familiarity of the property, you can’t price your house in a vacuum. Its value is interconnected with your surroundings. External factors like mortgage rates and local housing inventory levels will influence what a buyer can and is willing to pay. To pinpoint a price, you need to put your house in the perspective of the larger market — and that’s exactly what a comparative market analysis is designed to do.
At the heart of the CMA, you’ll find a list of “comps” or comparable sales. These are nearby active, pending, or recently sold listings (going back a maximum of three to six months) that offer a point of reference as to what your own house is worth. Listed for each comp will be key information including the number of beds and baths, square footage, amenities, heating and cooling features, number of fireplaces, school district, and more.
The comps section will also pull in any available photos of the featured houses and the “remarks” describing the highlights of the property, such as a breakfast bar or high-end appliances. A CMA should ideally feature no fewer than five comps, but better ones may have upward of 10 properties included.
Using these comps, the agent creating this report will be able to determine a price range for the group of properties as well as an average sales price to inform their analysis. Details such as your ZIP code’s median listing price, average days on market, months of inventory, and average price per square foot may be added to the report as additional indicators of how competitive the market is and what your home will sell for.
2. Get more detailed than a web estimate
When you need to know how much your home is worth, an online tool such as HomeLight’s Home Value Estimator can be a great starting point. Our tool pairs housing market data from multiple trusted sources with your own personal insights about your home, including whether you have a single-family property or condo and how much work the house needs. We’re able to pull information from tax sources, as well as the sales history and records for properties, to estimate your property value. This can be a quick (not to mention free) option for homeowners who’d like to do a quick value-check up.
However, a top real estate agent can fine-tune the estimation of what your home is estimated to be worth with greater precision, which is essential for the critical task of pricing your home for the market. Knowledge of the area, insights into buyer trends and preferences, and deep evaluation of the home’s characteristics and condition gives your real estate agent a leg up on any instant home value tool out there as far as accuracy goes. Here’s where a real estate agent’s expertise comes into play:
Ability to hunt for missing data
Online property tools may have varying levels of access to what’s known as the multiple listing service (MLS) for your area, which is the holy grail of direct, first-hand property information as the database that real estate agents use to track and share listings. In addition, some public records could be missed or left out of an online estimate.
An experienced agent, on the other hand, will leave no stone left unturned in digging up important details that could shed light on trends for the locale or what your home is worth, even if they have to run a separate search for it.
“What I do is, I dissect the entire market, but also even title reports, since not every property makes the multiple listing service,” says Zandra Ulloa, a top real estate agent in San Diego. “It’s very important that when you hire a professional that they’re pulling from every avenue that has information.”
Accounting for recent upgrades
If you’ve been diligent about keeping your home fresh and modern over the years while taking care of routine maintenance, you want to be sure you don’t under-sell the property. On the other hand, you can’t assume that you’ll recoup your home investments dollar for dollar. Based on their first-hand experience with the area, an agent will be able to determine how much value to add for updates like new flooring, updated cabinets and countertops, and remodeled bathrooms — which even the most detailed home value estimator could fail to capture.
“We dig pretty deep,” says Ulloa. “I ask for a list of repairs. I ask for a list of upgrades. I also work backward and say, ‘OK, I understand you may believe your house is worth $1 million, but 9 out of 10 times, the buyer is online. So, when you have a third party site that indicates that your home value may be only $925,000, I have to fight the good fight to justify why you, Mr. Seller, are asking for $75,000 over that price.’”
Changing buyer preferences
Living through a pandemic has caused many Americans to re-evaluate their priorities at home. Today, buyers may be more willing to pay for certain features such as private outdoor space and a dedicated home office than they were in previous years, and fast-moving trends will be more easily accounted for through a nuanced CMA. For example, real estate agents estimate that homes with pools are now worth 69% more than they were prior to COVID, with backyard swimming holes adding over $27,000 in additional home value today. If you think about it, a digital valuation tool will have a hard time factoring in the buyer “swoon” factor shaping current property values.
3. Replace emotions with facts and data
Of all the investments people make in life — from their first car, to their college degree, to the stocks and bonds that fuel retirement — none carry the emotional weight of a home. It’s hard to separate your own opinion from the reality of market value when you’re blinded by memories and a sense of pride in a house you’ve taken great care of.
A study from HomeLight revealed that 52% of top real estate agents cite the temptation to overprice, especially in hot market conditions, as the biggest challenge sellers face in the listing process. So when you take steps to part with the home you love, go with a CMA — not your gut.
The same reasoning applies to selling a home that you may have negative or nonchalant feelings toward. When a loved one passes away, a marriage goes belly-up, or life takes you in a new direction, you might be tempted to ditch a place quickly, without regard to its potential and maximum value. A CMA can stop that from happening and help you command a fair price for the property.
4. Give you accuracy without the costs of an appraisal
A CMA is kind of like a middle ground between an online home value estimate and an official appraisal. To obtain an appraisal, you’d need to hire a licensed appraiser to evaluate the home, create a report, and assign a value based on their findings. Any lender financing a home will require an appraisal before closing, and you will likely need an appraisal to take a step like refinancing your mortgage.
While appraisals are generally trusted for their accuracy in the industry, they do cost an
average $450-$550 apiece. Unless you have a unique property or your agent is struggling to find comps, an appraisal shouldn’t be necessary to gauge pricing — you can do it all with an agent’s CMA. In addition, an agent’s CMA won’t cost the seller any extra (most agents will include a CMA as part of their listing services). And thankfully, a top real estate agent should be able to determine with a high level of accuracy what the home will eventually appraise for, so that there aren’t any surprises during closing.
5. Instill trust in your agent
A CMA can also be a great test of your agent’s experience level and dedication to the job. As you’re interviewing different agents, most should offer to provide a CMA for free. When you receive a CMA, check for these items to see if it’s been done professionally:
- Does the CMA include a decent amount of comps — ideally 10-12 if your house is in an area with similar properties nearby?
- Does the report include photos of your home as well as the subject properties?
- Is there a map of the comps, and can the agent explain why they chose the selected properties, demonstrating knowledge of the area?
- Has the agent offered a recommended price range at the end or set up a call with you to discuss pricing based on your selling goals and timeline?
- Are there additional facts included in the report, such as market health charts showing inventory levels, price per square foot, and housing stock age range for the area?
A great CMA leaves no detail behind — and thorough versions can stretch up to 30 pages long or more. You aren’t looking for the agent who promises to sell your home for the most money — but the agent who can speak the most intelligently to how they arrived at their conclusions.
Bottom line: A CMA helps you arrive at a fair price tag for your home
A CMA is a deliverable from your agent that tells you a lot as a seller. The report and CMA creation process relies on much of the same data and property information that online estimators do, but adds an additional layer of nuance and expertise from an agent. With an agent’s oversight, you can better avoid overpricing a home you’re attached to. You’re also less likely to undersell a great property that you’ve made amazing upgrades to over the years.
A CMA takes into account the broader market as well as the little things that make your home special. Whether you have a great school district, quiet cul de sac, or incredible backyard, a great agent will make sure it’s all factored into your home’s CMA. Now that you know what a CMA is all about and what it can do, let us know if you’d like to meet with a top agent in your market who can put a thorough CMA together for you. We’d be happy to make an introduction!
Header Image Source: (Nathan Anderson / Unsplash)