Comparable Market Analysis Basics

Comparable Market Analysis

What's the fair market value of the home you want to buy or sell?

The best way that real estate agents and appraisers determine a home's fair market value is to prepare a comparable market analysis also know as a CMA. Before making an offer on the purchase of a home or before listing your home for sale a competent real estate agent should prepare a CMA.

A CMA is prepared by using the sales price (solds) of homes in the area. Sales price is given far more weight than asking prices when determining fair market value. Sellers can ask whatever they want for their homes and are not necessarily what the market is willing to pay. Sales prices are always facts, so they indicate fair market value.

A CMA report will compare your home (whether selling or buying) with all other houses that are:

1. Approximately the same size, age, and condition
2. Located in the same neighborhood
3. Have sold in the last 3-6 months

The data must be comprehensive and should be put into price-per-square-foot to make comparing one home to another easier.

Getting good information on fair market values can be more difficult if some parts of the puzzle are missing, especially in a neighborhood where homes have not sold recently. 3-6 months is generally long enough to have a good cross section of comparable sales, however the older the comparable, the less likely that it represents today's fair market value.

CMA's are good for establishing fair market value however evaluating the comparables blindly without knowing certain details of the subject properties can provide false information. Things to be aware of are:

Wear and tear:
No two homes are the same after they have been lived in.

Differences within a neighborhood:
One house may be sitting next to a nice park, while another sits next to a busy road.

Comparables taken out of neighborhood:
If there are no comparables within the last 6 months, the data may have to come from other neighborhoods and adjustments must be made for this.

Other variables:
Scenic views, age, size, floor plans, updated rooms, small and large yards all must be accounted for.

Valid comparisons can't be done by merely reading comparables taken from a web site or the multiple listing service. You don't know how exaggerated the information is if you or your agent haven't seen the houses for yourself. Personally touring and evaluating the comparables is the best way of knowing for sure that your comparing apples to apples and not some other combination.

Preparing a proper CMA takes a professional. RE/MAX Associates on average lead agents of competing brands in advanced real estate education and production. That's why they're known as "The Real Estate Leaders®" and why no one in the world sells more real estate. Take a look at the graph. Numbers don't lie!

If you are interested in selling or buying a home in Frisco, Plano, Garland, Allen, Celina, Prosper, McKinney, The Colony, Richardson, Little Elm, Carrollton, Lewisville, Dallas, or any where in the North Texas area, please take a moment to fill out the form below and you will be put in contact with a competent, professional Realtor® that will provide you with a comparable market analysis prepared the right way.

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