A Comparative Market Analysis (CMA) is one of the most widely used and most reliable methods of estimating the true value of a property. A CMA details the property into its essential characteristics like a number of bathrooms, bedrooms, and the square footage of your home and lot. It will use these details to compare the property to nearby homes that have similar characteristics that are currently on the market or have recently sold. But how can you use a CMA to your advantage when buying a home? Read on to find out!
When looking at a CMA it is important to look at the sale price, not the list price. Active and pending properties will not have a sale price listed as this price is not reported to the MLS until the property is in escrow. Remember that the list price is merely the asking price for a home while the sold price is what was actually paid by a buyer for the property when it actually closed.
Adjusted Average Sales Price
At the most basic level, a CMA can be used to gauge what you should offer on a house in a three step process. The first thing you will need to do is get the outer limits of a price range by throwing out extreme comparables like homes that are over upgraded or need to be completely torn down. This will give you a high and a low price to start with. To narrow down this range, take the average sale prices of the comparable properties and add them up then divide the sum by the number of houses. This average sales price will need to be adjusted upwards or downwards based on the comparable properties compared to the property you want to buy. To figure this out, think about if the units or lots are smaller or larger? Do they have the same number of beds and baths? What about the upgraded features? Location? And when was it last sold? Your realtor may do this for you but it is important for you to understand what goes into the adjusted average sales price before making your offer.
The Degree of Similarities
All of these averages don’t mean that much if the properties in question are not really that similar. One of the biggest drawbacks to rough-and-dirty web CMAs is that they pull information from public records, which may be incorrect. Online sources are not able to tell if the house is in an inferior location like near railroad tracks or in a very different neighborhood than the others. If your market took a major upswing or downturn in three months, a six-month-old sale won’t be nearly as predictive of the value of your potential home. Your real estate agent will be able to tell you if the market took at serious dive or if the location is different from the comps.
With all of this technology at our fingertips, sometimes all you need is a little human contact to be able to help you negotiate your true comparative market analysis. A comparative market analysis is an important tool that should factor into the price of your potential new home. For more information on working with a real estate agent, call Simply Referable today!
Comparative Market Analysis with Simply Referable!
The small team of realtors at Simply Referable is deeply focused on creating a memorable selling experience for you and your family. Each of our team members has an area of expertise, and we strive to form lasting bonds with each of our clients. We want to be your go-to realtors every time you or a friend wants to make a change. With local experience, our realtors can help you choose a house that is just the right fit for your family, now and forever. Contact us online or give us a call at 410-983-9045.