I spend many hours a week working on comparative market analysis reports for clients, friends, and neighbors. It’s my job to know our Boulder County market and analyze what’s happening.
In Realtor lingo, we call these reports CMAs (comparative market analysis). The CMA is a side-by-side comparison of homes for sale and homes that have recently sold in the same neighborhood and price range. Factors such as type of home (single family vs. attached dwelling), # of bedrooms/baths, location, lot size, etc. are all considered when coming up with value.
The purpose of a CMA is to show fair market value, based on what other buyers and sellers have determined through past sales, pending sales and homes recently put on the market. I use both active and sold properties in my analysis. Recently sold properties help me calculate the true value. Properties currently for sale help me determine the direction of the market, and where to set the asking price to be competitive within the current market. I also look at properties that have expired (market rejected) and withdrawn (for a variety of reasons). All that data helps us understand where the value is in today’s market.
A CMA is an important tool for both buyers and sellers.
Why does a Seller need a CMA?
When you are looking to sell your home, you need to be priced according to today’s market. You don’t want to price yourself out the market (by starting too high) but you also don’t want to give away your home and lose money in your pocket. What you want or need to get out of your home has no bearing on its value. What buyers are willing to pay for a similar home gives you an idea of what price you should list the home at to be competitive in the market. I assume if you are putting your home on the market, you want to sell it. Right? Every couple of weeks I give my Sellers an updated CMA. The market is dynamic. The CMA is a here-and-now snapshot of the market, based on the most recent data available, but it can instantly be rendered obsolete by a new listing, or a change of status in a home with the same criteria. Why? The market is constantly changing – new listings, pending sales, closed sales, price reductions, and expired listings.
Why does a Buyer need a CMA?
It is important to know that the home you are buying is being purchased for fair market value. You don’t want to pay too much for a home just because you love it. You also don’t want to come in with too low of an offer just because you want a deal. There is a chance you could lose that home by not understanding its value. I help buyers make sense of recent sales and other active listings to guide them to an offer price. It is a buyer’s final decision how much their offer should be, but using my market knowledge and expertise will help get you there.
A CMA also looks at the average time on market for sold and active listings, as well as inventory levels specific to the neighborhood where you are looking to buy or sell. A CMA starts wtih a lot of information (like a big puzzle) and I break down that data to make it easier to understand.
A CMA is not an appraisal. A real estate appraisal is a comprehensive evaluation performed by an independent professional appraiser. Typically, a CMA prepared by an experienced agent with good knowledge of the local market is right in line with your home’s appraised value.
Now you know what to expect next time you need a CMA.