If you’re new to the world of real estate, the term “CMA” might be a little confusing. The article below explains what a CMA is, how it works, and how it differs from an official appraisal. Keep reading to learn how you can get started figuring out how much a property is worth.
At its core, a comparative market analysis (CMA) is a report that helps readers to estimate the value of a property based on the sale prices of other, similar properties that have recently sold in the area. Typically, this type of analysis is used by sellers to determine an appropriate listing price for their home. However, buyers can also use it to determine how much to offer on a property.
For the most part, CMAs are completed by real estate agents, who have the ability to use MLS data to find the best properties to compare. However, as a buyer or seller, you could perform your own informal version of a CMA using real estate search portals like Zillow or Realtor.com. That said, if you decide to do so, bear in mind that the information you receive may not be as up-to-date as the data that your local MLS can provide.
In order for a comparative market analysis to be useful, it needs to take a close look at a few properties that are fairly similar to the property being bid on or listed for sale.
Once these properties have been selected, they can help the individual conducting the analysis determine an appropriate price range. After that, adjustments can be made within that price range to accommodate for any differences between past sales being analyzed and the property that’s currently on the market.
Usually, the following criteria are considered when selecting past sales:
While CMAs and appraisals may sound similar one is undoubtedly more official than the other.
On the one hand, a CMA simply provides a price estimate that can be used as a starting point for negotiation in a real estate transaction. On the other, appraisals are used by banks to determine how much they are willing to lend. An appraisal must also be conducted by a state-licensed professional who knows how to analyze differences between properties in greater depth and can evaluate market conditions to determine necessary changes in market value.
Whether you’re buying or selling a home, a CMA can be a useful tool in determining how much a property is worth. Real estate professionals perform CMAs all the time, so don’t hesitate to reach out to your agent for assistance when you’re ready to start negotiating.