What is a Comparative Market Analysis?
A Comparative Market Analysis (CMA) is an evaluation of your home. In order to determine this, similar homes in an area – also known as comparables — are analyzed to determine the value of a home.
Real estate agents perform a Comparative Market Analysis to determine and outline a price range for a home, and then use it as a guide for putting your home on the market or making an offer on a particular home.
The first step in doing a Comparative Market Analysis is setting criteria. When creating a Comparative Market Analysis you want to compare Apples to Apples. Compare similar homes to what you own, if you do not follow this rule, you might overestimate the value of your home, you might undervalue what it might be worth.
Comparable Home Criteria
You should aim for at least three matching criteria and the more the better. The following points are the standard criteria :
- Location: The location of a home is more than its school district. Location includes things such as private area, shopping, easy access to important places, etc.
- Type: Compare your house to a house—not a condo. Compare your condo to a condo—not a house.
- Date of Sale: You’ll want your comparables to be recent. Work within a three month period and expand your time to no more than to six month period of time. As well, remember, the information will be not as useful if you extend it to a full year period.
- Size: Your comparable’s square footage should be as close to what your home would be today. It is best to choose a home to compare with yours that is as close as you can get to the square footage of your home. If you use homes that are significantly larger or smaller than your home, you will have to adjust your price appropriately
- Neighborhood & School District: If at all possible your comparable should be within the same neighborhood and school district. It’s actually a really good idea to drive by the home to get a first hand sense of the neighborhood.
- Number of Bedrooms & Baths: Try to compare homes with similar bedrooms and baths. There is some wiggle room here, but a home with three or four more bedrooms than your home is not a good comparable.
- Age & Style: Try to compare homes with similar styles and if possible from the same age group.
- Condition of Home: If your house is a fixer-upper that needs a new roof and needs work done in the yard, it’s best not to compare it to the immaculately maintained house down the street.
- Lot Size and Usability: The lot size of your comparable should be generally close to that of your property. A postage stamp yard with no garage cannot accurately compare with a large yard that includes a garage.