What is Comparative Market Analysis?

339 reads · Last updated: December 5, 2024

A comparative market analysis (CMA) estimates a home's price based on recently sold, similar properties in the immediate area. Real estate agents and brokers create CMA reports to help sellers set listing prices for their homes and help buyers make competitive offers. In addition, you can perform your own comparative market analysis by researching comparable properties (known as "comps") on real estate listing sites, such as realtor.com.

Definition

Comparative Market Analysis (CMA) is an estimate of a home's value based on the sale prices of similar properties recently sold in the vicinity. Real estate agents and brokerage firms create CMA reports to help sellers determine a listing price for their homes and assist buyers in making competitive offers. Additionally, individuals can conduct their own comparative market analysis by researching comparable properties (known as 'comps') on real estate listing websites.

Origin

The concept of Comparative Market Analysis originated from the need in the real estate market to provide a reasonable price reference for both buyers and sellers. As the real estate market became more complex and information technology advanced, CMA has become an indispensable tool in real estate transactions.

Categories and Features

Comparative Market Analysis is primarily divided into two categories: Seller's CMA and Buyer's CMA. A Seller's CMA focuses on helping sellers determine a reasonable listing price, typically including a detailed analysis of similar sold properties. A Buyer's CMA helps buyers assess a fair offer for a target property, ensuring they do not overpay. The features of CMA include its objectivity based on market data and the practicality of comparative analysis.

Case Studies

Case Study 1: In San Francisco, a real estate agent used CMA to help a client sell a property above the market average price. By analyzing sales data of similar properties in the area, the agent suggested listing the home slightly above the market average, successfully attracting multiple competitive bids. Case Study 2: In New York, a buyer used CMA to discover that the asking price of a target property was higher than the average sale price of similar properties nearby. The buyer negotiated with the seller based on this information and eventually purchased the property for less than the original asking price.

Common Issues

Common issues include: How does CMA differ from a formal appraisal? CMA is an informal market analysis tool primarily used for price reference, whereas a formal appraisal is conducted by a professional appraiser and carries legal weight. Another issue is the accuracy of CMA. The accuracy of CMA depends on the similarity of the selected comparable properties and the currency of the market data used.

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