What is a Comparative Market Analysis (CMA)?
Whether you’re looking to sell your home or buy a new one, money will be a significant factor throughout the process. But how do you know how much a home is worth? Who determines these numbers, and are they accurate representations of home value? Here, we’ll go over everything you need to know about getting a comparative market analysis and how it helps determine the listing price.
What is a Comparative Market Analysis?
A comparative market analysis (CMA) is a tool for estimating the value of a specific property by comparing similar properties in the area. Real estate professionals often use it and can help sellers determine listing their price. Several factors contribute to the overall price, and a comparative market analysis uses data from homes sold in the current market for a reliable estimate.
Who Creates a Comparative Market Analysis?
Typically, the seller’s real estate agent or broker will be responsible for creating a CMA. This helps them determine the fair market value to get an accurate listing price. There are ways a seller can perform their own CMA, but real estate professionals are experienced. They’re able to utilize more accurate information based on the current market and, in general, know the market better. Online calculators can give you a general idea of a list price, but working with someone who intimately knows the real estate market is the best option if you want to maximize your profits with a competitive sale price.
The Difference Between a CMA and an Appraisal
A certified appraiser performs a home appraisal and typically requires a state license. Mortgage lenders often require this to ensure the property’s value aligns with the loan amount. Appraisals can also be used for different legal situations and tax assessments, so it’s more of a formal process than getting a CMA. It’s also used for different reasons.
The Difference Between a Comparative Market Analysis and a Competitive Market Analysis
A comparative market analysis determines a property’s market value by comparing it to similar properties nearby. A competitive market analysis determines the competitiveness of a specific market’s landscape in terms of business strategies. This gives businesses a chance to consider their position compared to competitors. A comparative market analysis is important for a buyer or seller in the housing market, while a competitive market analysis is important for a business owner.
What Does a Comparative Market Analysis Include?
When real estate agents conduct a comparative market analysis, they’ll include various details from similar properties in the area to estimate the value of your home. Typically, this data will be taken from three to five recently sold, similar homes in the area. CMAs will need to have details such as:
Location — The most accurate comparisons come from properties in the same neighborhood, ideally within a short radius. Local market data helps capture price differences driven by school districts, traffic, and access to nearby amenities.
Neighborhood Amenities — Neighborhood features like parks, shopping areas, and recreational spaces can add to a property’s appeal and are factored into the analysis. HOA inclusion can also change the value of a home.
Square Footage of Each Property — The home’s total square footage is a foundational metric in CMAs, providing a basis for comparing properties of similar sizes.
Lot Size — Agents consider the total lot size, as larger lots generally carry higher home values.
Number of Bedrooms and Bathrooms — The number of bedrooms and bathrooms is critical; more rooms often attract larger families or buyers looking for versatile spaces, increasing the property’s value.
Luxury Features — Homes with special features like swimming pools, finished basements, patios, garages, and other special additions increase how much a home is worth.
Age of the Property — Newer homes typically have a higher price range, which can help create a more competitive offer.
Condition of the Property — Renovated homes or homes that have been kept in good condition will increase the selling price.
Terms of financing (i.e., contingencies that made the homeowner adjust the price; seller concessions)
Date of Sale — Comps are best when sold within the last three to six months.
How is a CMA Report Done?
Creating a CMA report is a step-by-step process combining local market analysis, property details, and adjustments for home differences. While a listing agent typically performs this report, buyers and sellers can learn how it’s conducted. With that said, here’s how it’s done:
Consider the Neighborhood
Understanding the neighborhood is the first step in creating an effective CMA report. Real estate agents and brokers consider the area’s specific features, including schools, recreational facilities, and other neighborhood amenities that influence a home’s appeal and market value. They also analyze the demand in the area—if it’s a hot market, they may expect homes to sell for a premium compared to colder markets where properties may sit for longer.
Gather Information About the Subject Property
A detailed understanding of the subject property is crucial to accurate comparison. This will include all the components listed above for the home you sell (or buy if performing a CMA as a buyer).
Select Comparable Properties
Real estate agents use their understanding and experience with market trends to seek similar homes that have recently sold, usually within the past three to six months. These comps are used to create a CMA. They
Comps should be as close to the subject property as possible in terms of size, layout, and amenities. In markets with limited recent sales, agents may widen their criteria slightly to include properties in nearby neighborhoods or with minor differences to ensure enough data. However, comps should be as similar as possible for a more accurate property value.
Adjust for Differences
Since no two properties are identical, agents will need to adjust the comps’ prices based on differences with the subject property. Adjustments account for variations in lot size, property condition, age, or special features. For instance, if a comparable property includes a newly renovated kitchen while the subject home does not, agents may reduce that comp’s adjusted price to reflect this discrepancy. The same applies to differences in bedrooms or even location in a specific subdivision.
Calculate the Price Per Square Foot
Finally, the price per square foot can be determined. After making the adjustments above, you’ll need to divide each comp’s adjusted sale price by its square footage. This allows agents to find a metric that can best estimate the market value of a property. After averaging the adjusted price per square foot from all selected comps, you can multiply this figure by the subject property’s square footage, arriving at a data-backed price estimate.
Comparative Market Analysis Example
Here’s an example of a CMA for the property at 123 Maple Street to illustrate how calculations are made.
Subject Property: 123 Maple Street
Location: Quiet suburban neighborhood with nearby schools and parks.
Square Footage: 2,000 sq ft
Lot Size: 0.25 acres
Bedrooms: 3
Bathrooms: 2
Age: 20 years
Condition: Good, with minor upgrades to the kitchen and bathrooms.
Special Features: Detached garage, partially finished basement, backyard patio.
Comp #1: 125 Oak Drive
Location: 0.5 miles from subject property, similar suburban setting.
Square Footage: 2,100 sq ft
Lot Size: 0.3 acres
Bedrooms: 3
Bathrooms: 2
Age: 22 years
Condition: Excellent; recently renovated kitchen and new flooring.
Special Features: Attached garage, large deck, no basement.
Sale Price: $425,000
Date of Sale: 2 months ago
Comp #2: 135 Pine Avenue
Location: 0.3 miles from subject property, same school district.
Square Footage: 1,900 sq ft
Lot Size: 0.2 acres
Bedrooms: 3
Bathrooms: 2
Age: 18 years
Condition: Good; well-maintained, but no recent updates.
Special Features: Detached garage, no patio or deck, small shed in backyard.
Sale Price: $400,000
Date of Sale: 4 months ago
Comp #3: 140 Maple Street
Location: Same street, 0.1 miles away.
Square Footage: 2,050 sq ft
Lot Size: 0.25 acres
Bedrooms: 4
Bathrooms: 3
Age: 20 years
Condition: Fair; some areas need cosmetic updates.
Special Features: No garage, large patio, partially finished basement.
Sale Price: $410,000
Date of Sale: 1 month ago
Adjustments for Differences
To make these comps more comparable to the subject property, adjustments are made for differences in features, size, and condition:
- Comp #1: Adjust down for recent renovations (+$10,000 for no basement, -$15,000 for newer kitchen).
Adjusted Price: $425,000 – $15,000 + $10,000 = $420,000
- Comp #2: Adjust up for smaller size (-$5,000) and lack of patio or deck (-$10,000).
Adjusted Price: $400,000 + $5,000 + $10,000 = $415,000
- Comp #3: Adjust up for additional bedroom and bathroom (+$20,000) but down for needing updates (-$10,000).
Adjusted Price: $410,000 + $10,000 = $420,000
Calculating Price Per Square Foot
After adjustments, we calculate the price per square foot for each comp.
Comp #1: $420,000 / 2,100 sq ft = $200 per sq ft
Comp #2: $415,000 / 1,900 sq ft = $218 per sq ft
Comp #3: $420,000 / 2,050 sq ft = $205 per sq ft
Average Price per Square Foot:
($200 + $218 + $205) / 3 = $207.67 per sq ft
Final Estimate for Subject Property
Using the average price per square foot, we estimate the value of the subject property:
Estimated Price: 2,000 sq ft * $207.67 = $415,340
Suggested Listing Price
Based on this CMA, a reasonable listing price for the subject property at 123 Maple Street would be around $415,000. This price reflects local market conditions, comparable features, and recent sales data, setting a competitive and realistic value for the home.
Partner with a Reputable Real Estate Agent Today
Whether you’re looking to buy a home or sell, First Star Realty can help. Our team of real estate professionals have years of practice and knowledge and continually work to ensure you have the best experience possible. We truly believe we haven’t done our job if you don’t walk away satisfied with our realty services. If you’re ready to buy or sell a home, contact First Star Realty. Our seasoned real estate professionals are dedicated to providing exceptional, personalized service to our clients. Call us at 479-267-1600 to get started, or fill out a contact form today.
