“An investment in knowledge pays the best interest.”
– Benjamin Franklin
What’s with CMAs and why do Realtors talk about them so much?
How do Realtors use CMAs to determine what I should list my home for?
Why are CMAs important in real estate?
Who benefits from a CMA?
Ah, the Comparative Market Analysis (CMA), the Sherlock Holmes of real estate resources. It is an indispensable tool used by savvy real estate professionals, to determine the current market value of a property.
Gathering Data
To create a CMA, the Realtor must first gather as much intel as possible on recently sold properties in the same or similar neighborhoods as the subject property (the one being evaluated). We’re on the hunt for facts like property’s size, features, condition, and sale price. If Realtors can’t get all the information they need from the MLS or public records, they will call the listing agent of that recently sold property. It’s real-life detective work, but data and no murder scene.
Comparing Properties
Once the intel has been gathered and pinned up on the wall with thumb tacks, the professional gets out the red string and starts to compare the subject property to the recently sold properties. They look for similarities and differences in terms of location, size, layout, upgrades, additions, number of bedrooms and bathrooms, amenities, and other relevant factors. Are the Jones cookies softer or crisper?
Adjustments
If there are differences between the subject property and the selected comparable properties, adjustments are made to account for these variations. This is where we add and subtract features like a frantic accountant on Tax Day. For example, if the subject property has one less bedroom than a comparable property, an adjustment can be made to account for that difference. If your house could speak, it might say, “I may not have a new kitchen, but have you seen my backyard?”
Calculating the Value
No need for a math lesson thanks to KCRAR offering its members the latest in today’s technology. After making necessary adjustments from all the intel we gathered on our adventure, we click “calculate”. After AI runs through relevant reports, data, and statistics from local records and comparable properties, it will generate an estimated market value range for the subject property. The range allows for the condition of the property. If the home needs major repairs, it will be at the low end of the range. If the home is in mint condition (no repairs needed, move in ready – new carpet, zero floor or countertop stains, fresh paint, etc.) it will be at the high end of the range.
Voila! There you have it, folks – a CMA provides valuable insights into the current real estate market and helps determine a property’s fair market value. Assisting sellers and buyers alike make informed decisions; and as you can see, proficient detective work can make or break a CMA. Oh, but did you know CMAs don’t just stop after finding value? Remember how I mentioned in “Calculating the Value” that our software also runs the report through various public records? Because of this, CMAs are also loaded with neighborhood insights, historical data, and more. Should you decide you want a CMA done to see how much your home has appreciated, ring me up and I’ll be happy to get out my cloak and spyglass.
Other relative blogs you might find helpful [The True Value of a Realtor] & [The Process of Selling your Home] & [Realtor’s Tools of the Trade]
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