by Teren MacLeod
Your comparative (or competitive) market analysis (CMA) is a snapshot of the local real estate market in comparison to similar properties in the area. CMAs are convenient reports that help sellers choose a realistic listing price and can help buyers make more informed offers.
CMAs are generated using data from the multiple listing service (MLS) for the area the property is located in, and the numbers will vary depending on the search fields that your real estate professional uses. Each additional field included in generating the report makes the search increasingly specific. Variables include, but are not limited to, type of property, location, land attributes, environmental considerations, number of bedrooms and baths, living areas, square footage, additional buildings, and more.
The resulting CMA is a report that tells you which homes have recently sold, their selling prices, how long they were on the market and other information. The CMA will also tell you about homes in competition with yours that are similar in size, price, amenities, and location. Although the MLS database has a great deal of information, there are some amenities and other criteria that are simply not available in the database to use in developing the CMA.
CMA results may vary even between identical homes simply because one property offers better drive-up appeal or is in better condition than another. One may be updated or staged more attractively. Those differences can be reflected in the listing price, the buyer’s offer, and the final closing price.
The Olympic Peninsula is an area that does not have a lot of “look-alike” communities and homes. Often more eclectic than metropolitan areas, we see a wide range of property types and values, making a professional assessment even more helpful.
When you’re looking at properties that sold, you can also learn how long the home took to sell and what the list to sell percentage is. This percentage is often calculated using the last listed price. If there were price reductions between the time the property was originally listed and the final listing price the deal was based on, the list to sell should be calculated using the original listing price to get a more accurate sense of the market.
There are often several circumstances that play into the final sale price. One thing a CMA can’t tell you is why a seller agreed to take less for their property than they originally hoped for, or why a buyer paid over market for another home. Family problems or relocation, illness, and other reasons all play a role. If the sale was quick, the seller was likely highly motivated to take the first offer. If it didn’t sell quickly, the seller may have overpriced the home.
For these reasons, CMAs are not home valuations. They are simply valuable tools to use alongside your real estate professional’s experience and knowledge of the market. If you are the seller, your real estate professional will suggest a pricing strategy for you based on the CMA, but the asking price will be up to you. Often a series of price reductions will see an end result of less money to be realized in the sale, making it important that the initial pricing be within a reasonable range. If you are buying, your real estate professional’s CMA will inform your decision-making when you are developing an offer as your initial position for further negotiation.
Finally, remember that a CMA is only as good as the most information available in the MLS database on the day it was prepared. Be sure to keep yourself updated as you prepare to sell or purchase, a home, land, or other property.