Comparative market analysis (CMA) is the tool that is used to compare the market value of the houses whether buying or selling (inventory) in the desired area. Pricing is the most important factor when it comes to buying or selling a house. For selling, based on CMA, the actual worth of the property can determined before putting it in the market. Similarly, when buying a house, CMA will help you know at what cost similar houses in that area were sold for. It informs the buyers about the prices of recent properties sold in a desired area property so that they should not be paying more than the actual worth of the property.
What is a CMA: The comparative market analysis is not an appraisal. We prepare CMA by using the information from MLS, market reports and other appropriate areas. Whereas, an appraisal is prepared by a certified property appraiser using established guidelines based on comparable values or replacement values.
Important factors that are considered while preparing a CMA range from square footage, number and size of bedrooms and bathrooms, amenities and location, finishes and upgrades, the age of the home and other homes that may be shortlisted as comparables should have been recently sold.
The property to be sold or bought and comparable should be as similar as possible. Detached house can only be compared with a detached house, semi with semi, townhouse with townhouse and so on. Also, the location of comparables should be in the same area as subject property. Home features are compared side by side with the subject property and valuations are raised or lowered, depending on the comparison.
CMA as a Real Estate Tool
The CMA report is a very user friendly tool. It is prepared by a realtor and can be very easily understood. It informs about what reasonable pricing should be whether buying or selling the property. It is not compulsory to have a CMA prepared. But in its absence, sellers and buyers both can run the risk of negatively affecting the selling/buying process. Without adequate information and knowledge, buyers can overpay for the property and sellers can undersell their property.