What is a
Comparative Market Analysis?

You Want to Sell Your Home

Where does a comparative market analysis, commonly referred to as a CMA, come into the picture?

Before you begin the process of selling your property, in order to be able to determine an asking price, you need to have an estimate of its home market value. You've probably received all sorts of junk mail from local real estate brokerages over the years, offering free no-obligation evaluations.

Some of these REALTORS® might simply visit your home and offer a verbal opinion of value. They may be accurate, but how would you know, especially if you don't know and trust them. Others might be willing to invest the considerable time necessary to research and prepare a detailed written CMA.

Although comparative market analysis reports can vary in scope, from brief summaries to multi-page tomes, a typical comparative market analysis report will contain the following information:

Active Listings

These are listings of homes currently for sale in your area. They're your competition only. No conclusions regarding home market value should be drawn from these since sellers can ask whatever they want for their homes. And often, they're unrealistic. Only a sale price may be considered indicative of market value. However, if a competitive listing is priced realistically, it can assist you in determining an asking price. It's wise to list competitively.

Conditionally Sold Listings

These are homes currently under contract, that is the sellers have accepted a conditional offer from a buyer who needs to arrange financing, a home inspection, has a house to sell or requires time to fulfill some other function prior to committing to an unconditional (firm) sale. The agreed sale price is not released by the listing brokerage until all conditions have been fulfilled by the buyer, or seller in some cases. However, conditional sales can indicate market trend.

Sold Listings

The best comparable sales are listings of homes that have sold during the past few months, assuming market conditions remain the same. These are the sales included in house appraisals performed by an accredited appraiser when evaluating your home for the mortgage lender of the buyer. It's very important for you to seriously consider these pages of a comparative market analysis because these are the actual prices paid for homes similar to yours in your neighbourhood. Adjustments can be made to the estimate to reflect improvements or deficiencies of the other properties.

Expired/Suspended/Terminated Listings

These are listings of properties that were not sold during the term of the listing agreement, or were removed unsold from the market. Usually, listings expire without selling for one reason - the asking price was simply too high. However, listings are moved from the market for various reasons, such as a change of plans by the home owner.

Comparable Sales

... are those that most closely resemble your home in style, size, age, features, improvements, upgrades, physical condition and location. Obviously, a larger home than yours, or of a different, more valuable architectural style, or with more amenities and upgrades, would have a greater market value than yours. And a comparable property, virtually identical to yours, but backing onto a railway track, would have a lesser value. Similar homes situated on busy roads are worth considerably less than homes on quiet streets. And if you've delayed renovating your property over the years, count on a lower estimate.

Because it's virtually impossible for a home owner to avoid ...

Subjectivity

... regarding their own home, it's very important for a home owner to seek an honest professional opinion in this regard. A REALTOR® has the capability of viewing your property with total objectivity, in the same manner that a buyer would view it. Unlike you, a buyer lacks the emotional attachment to your home. That's quite normal.

The vast majority of home owners feel their homes are worth far more than what is realistic. During my extensive career, I recall on only two occasions that I had to inform a new seller client that their home was worth more than they believed it to be. Fortunately, they trusted me, because I sold their homes at a higher sale price than they expected. Were they happy? You bet.

If you're seriously considering listing your home for sale, with the hope of winning your listing, the REALTORS® will likely not charge a ...

Fee For Service

However, if you want to have an estimate of fair market value of your property, and you don't plan to list it for sale in the immediate future, and you choose not to hire a company which specializes in house appraisals, it's only fair to inform the REALTOR® of this fact before they do the work. They may not want to work for free, and elect to charge you a small fee for the report. So, if you need a comparative market analysis for a matrimonial conflict, a law suit or for any other non-sale reason, be honest. Don't take advantage of their enthusiastic interest in serving you.

Now, having said all this, keep in mind that these reports are just an educated guess. No one has a crystal ball. You'll not have a definitive estimate of fair market value until your home is sold - period.

So, if you're asking the question, 'what is my house worth?', there's only one way to find out. You either have a house appraisal performed by a certified appraiser, or hire a REALTOR® to produce a comparative market analysis.

Can you imagine attempting to sell your house without one?

Click this link to learn more about comparative market analysis, from a buyer's perspective. CMA's are also occasionally requested by, and created for, buyers prior to offering on a property listed for sale.

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