How To Do a CMA – Step-By-Step For Real Estate Agents
As a real estate agent, you know that accurately pricing a property can make or break a sale. Setting the right price not only helps in attracting potential buyers but also ensures that the seller gets the best possible return on their investment.
One of the most powerful tools for determining the right price is a Comparative Market Analysis (CMA). Yet, many agents find the process of conducting a CMA to be time-consuming and, at times, overwhelming due to the vast amount of data and variables involved.
The good news is, it doesn’t have to be this way. In this blog post, we will break down the process of conducting a CMA into simple, manageable steps.
I’ll provide you with a comprehensive guide to gathering relevant data, analyzing it effectively, and presenting your findings in a way that not only helps you set the right price for a property but also positions you as a knowledgeable and trustworthy professional in the eyes of your clients.
By the end of this post, you’ll be able to approach CMAs with confidence and ease, ensuring that you remain competitive and successful in the ever-evolving real estate market.
Gather Property Information
Importance of Collecting Accurate Data
Collecting accurate information about the property you want to analyze is crucial for conducting a reliable CMA. Incomplete or incorrect data can lead to misleading results, ultimately affecting the success of your real estate transactions. Providing your clients with trustworthy information not only strengthens your reputation as a real estate agent but also helps clients make well-informed decisions.
Types of Information to Gather
When gathering information about a property for a CMA, focus on collecting the following data:
- Location: Street, neighborhood, municipality, and county
- Square footage: Total interior living space, as well as any additional structures
- Number of bedrooms and bathrooms: Helps to compare properties with similar features
- Age: Year built and any significant renovations or updates
- Garage: Attached or detached, the number of cars it can accommodate
- Pool: Presence of a pool, and its size or type
- Acreage: If applicable, lot size and features, such as landscaping or water features
- Property photos: Visual representation of the subject property
- Type of flooring: Materials used throughout the home
- Type of foundation: Various foundation types can impact property value
- Tax records: Publicly available tax history of the property
Tips for Obtaining Property Data
Here are some tips for obtaining the necessary property data for your CMA:
- Zestimate: Check Zillow’s Zestimate as a starting point to determine an estimated property value
- Public Records: Look for tax records or assessor’s data, which typically include important property details
- MLS System: Use your local Multiple Listing Service (MLS) for comprehensive property information listings and recently sold property reports
- RPR: Utilize the Realtors Property Resource (RPR) system to access additional data and resources
- Property Inspection: If possible, visit the property personally or have a trusted professional assess the property condition and features
- Networking: Collaborate with colleagues or other real estate professionals to gather relevant information about properties in the area
With accurate property data, you can confidently perform a comprehensive CMA, thus benefiting your clients and your business.
Select Comparable Properties
Criteria for Choosing Comparables
When selecting comparable properties (comps) for a Comparative Market Analysis (CMA), it’s crucial to choose properties with similar features to the subject property. Consider the following factors when selecting comps:
- Location: Choose properties within the same neighborhood or a nearby area with similar market characteristics.
- Property type: Ensure that the comps are the same type (e.g., single-family home, condo, townhouse) as the subject property.
- Size: Compare properties with similar square footage, number of bedrooms, and bathrooms.
- Age: Select comps with a similar age or construction date as the subject property.
- Amenities: Compare properties with a similar level of upgrades, finishes, and included features.
Importance of Using Recent Sales Data
Using recent sales data is crucial for an accurate CMA. Ideally, comps should have sold within the last 3 to 6 months. This allows for an up-to-date reflection of the current market conditions. Older sales data may not accurately represent the current market, impacting the accuracy of the CMA.
Tips for Finding Comparables
Finding the right comps is essential for a precise CMA. Here are some tips for locating suitable comparables:
- Utilize the MLS: The Multiple Listing Service (MLS) is the primary tool for real estate agents to find accurate and comprehensive sales data. Search for criteria that match the subject property and filter the results to find recent sales.
- Leverage online tools: Websites like Zillow and Realtor Property Resource (RPR) can aid in finding comparable properties. Be cautious when using these tools, as data may not be as accurate as the MLS.
- Examine the neighborhood: Physically drive through the neighborhood to gain insight into the area and identify potential comparables. This can help you spot nuances that may not be visible in online data.
- Use a mix of sources: Rely on a combination of MLS, online tools, and in-person neighborhood examination to find the best comparables for your CMA.
Following these steps and considerations, you can effectively select appropriate comparable properties for a more accurate and reliable CMA.
Adjust Comparable Properties for Differences
Importance of Accounting for Differences
When conducting a comparative market analysis (CMA), it’s crucial to adjust comparable properties for differences to ensure accurate results. Adjustments impact the property’s value and help identify the right market price. By accounting for these disparities, real estate agents can establish a more precise estimate, preventing overpricing or underpricing.
Common Adjustments to Consider
Several factors can impact a property’s value, and adjusting for them allows agents to make a fair comparison. Common adjustments to consider include:
- Square footage: Differences in square footage can significantly affect property values. Calculate the value per square foot and adjust accordingly.
- Acreage: Differences in lot size or acreage should be taken into account, as larger or smaller lots can impact the property’s desirability.
- Basement: Properties with finished or unfinished basements may require adjustments, as they can offer additional living or storage space.
- Upgrades and improvements: Any significant upgrades, renovations, or improvements completed on either the subject property or comparables should be considered.
- Condition and age of the property: Adjustments should be made for differences in property condition and age, as these factors can have a substantial impact on value.
Tips for Determining Appropriate Adjustments
To establish accurate adjustments, consider these tips:
- Be objective: Avoid personal opinions or biases, and focus on facts and market data when adjusting for differences.
- Use available tools and resources: Leverage software solutions and tools to gather data and calculate adjustments quickly and accurately.
- Verify information: Ensure that the data used for adjustments, such as square footage or lot size, is accurate and up-to-date.
- Look for trends in the market: Analyze local real estate trends to determine if certain adjustments, like upgrades or property age, have a more significant impact on value in the area.
- Consult with experienced colleagues: Seek guidance from experienced real estate agents or appraisers to ensure appropriate adjustments.
By meticulously adjusting comparable properties for differences, real estate agents can provide clients with an accurate CMA, securing the most appropriate market price for their property.
Analyze the Market Conditions
Importance of Understanding the Market
It is crucial for real estate agents to understand the current market conditions to determine the market value of a property accurately. An informed agent will be more adept at guiding buyers and sellers in making appropriate decisions. Evaluating market conditions will enable agents to provide accurate pricing recommendations for listings and, in turn, generate successful transactions.
Factors to Consider in Market Analysis
When analyzing the market, several factors need to be considered. These include:
- Property Location: The location of the property affects its value. Proximity to amenities, transportation, schools, and other community features can have a significant impact on a property’s valuation.
- Age and Condition: The age and overall condition of the property can influence its market value. Well-maintained properties tend to have higher valuations compared to those in poor condition.
- Size and Layout: The size of the property, including its square footage and lot size, can play a role in its market value. Larger properties usually have higher valuations, as do properties with well-designed layouts and functional spaces.
- Features and Upgrades: Features such as energy-efficient appliances, updated kitchens, and modern bathrooms can increase a property’s value compared to similar properties without these upgrades.
- Comparable Properties: Examine recently sold properties in the same area with similar features and attributes to find a range of market values.
- Current Market Inventory: Assess whether it is a buyer’s or a seller’s market. This information is valuable for both pricing strategies and negotiation tactics.
Tips for Staying Informed
Real estate agents should stay informed of market trends and conditions for effective valuation and pricing. Several tips to remain updated include:
- Subscribe to Industry Newsletters: Keep up with the latest news, trends, and developments in the real estate industry by subscribing to relevant newsletters and alerts.
- Engage in Continuing Education: Attend continuing education courses to stay current with new strategies, techniques, and relevant tools for market analysis.
- Attend Local Real Estate Meetings: Attend local real estate events and network with other industry professionals for valuable insights on market conditions and trends.
- Leverage Technology: Utilize modern data analysis tools, such as real estate analytics platforms, to help gather and sort data on market trends.
By analyzing market conditions and staying informed about trends, real estate agents can better serve their clients by providing accurate valuations and creating effective pricing strategies.
Calculate the Price Range
Importance of Determining Price Range
Determining the accurate price range for a property is crucial for real estate agents when preparing a Comparative Market Analysis (CMA). A well-established price range helps agents in setting a competitive listing price that attracts potential buyers and ensures quicker sales. In addition, it serves as a foundation to prepare a compelling listing presentation for homeowners.
Methods for Calculating Price Range
- Price per square foot: One common method for calculating the price range is by analyzing the price per square foot of comparable properties. This can be calculated by dividing the sales price of a comparable property by its square footage.
Sales Price ÷ Square Feet = Price per Square FootFor example: PropertySales PriceSquare FeetPrice per Sq. Ft.House 1$500,0002,700$185.19House 2$525,0003,200$164.06 Once you have the price per square foot for each comparable property, you can multiply it by the total number of square feet for your subject property to estimate its approximate market value.
- Online home value estimates: Websites like Zillow, RedFin, or Realtor.com provide online home value estimates, also known as “Zestimates,” that can be used as a reference for setting a price range. For example, if Zillow estimates a home is worth $550,000, you can choose a range of $500,000 to $600,000.
Tips for Presenting Price Range
When presenting the price range during a listing presentation, it is essential to remember the following tips:
- Use clear, concise language to demonstrate your knowledge and expertise.
- Visually present data using tables, charts, or graphs to showcase comparable properties and their pricing.
- Highlight the factors that play a role in determining the price range, such as the property’s location, condition, and recent selling prices of similar properties.
Remember, a well-prepared CMA that includes an accurate price range will give you the edge during listing presentations and help convince homeowners to trust your expertise.
Prepare a Professional CMA Report
A Comparative Market Analysis (CMA) report is crucial for real estate agents to accurately estimate property values for their clients. The key elements of a CMA report should include:
- Introduction: A brief presentation of the subject property, location, and main characteristics.
- Comparable Properties: A selection of at least three recently sold properties in the area that are similar to the subject property in size, age, and condition.
- Price Per Square Foot: Calculate the average price per square foot of the comparable properties and use it as a base for determining the approximate value of the subject property.
- Adjustments: Consider differences between the subject property and comparables, such as upgrades or special features, and adjust the price per square foot accordingly.
- Final Value Estimate: Present your analysis and justify your conclusions on the property’s estimated value based on the provided research.
Tips for Creating Visually Appealing Reports
A professional-looking CMA report is essential for making a positive impression on clients. Here are some tips to enhance its visual appeal:
- Use a consistent font style and size throughout the report.
- Break down text into smaller paragraphs to make it easier to read.
- Utilize headings and subheadings to organize information.
- Highlight key points using bullet points or numbered lists.
Suggestions for Incorporating Visuals
Visuals can help convey information more effectively in your CMA report. Consider the following when incorporating visuals:
- Photos: Include high-quality images of the subject property and comparables, showcasing their main features.
- Maps: Provide a map that highlights the location of the subject property and the comparables, enabling clients to understand their proximity.
- Graphs: Use graphs to present trends in the local real estate market, such as average sale prices and days on the market.
- Tables: Summarize data and comparisons in tables for an easy-to-understand presentation.
By carefully selecting and incorporating these essential components, tips, and visuals, real estate agents can create comprehensive and visually appealing CMA reports serving their clients best.
Present the CMA to Your Clients
Importance of Effective Communication
When presenting a Comparative Market Analysis (CMA) to clients, effective communication is key. Real estate agents need to convey the purpose and results of the CMA in a clear and concise way. Clients must understand that the CMA helps determine the property’s fair market value, which is crucial for establishing a competitive price recommendation. The findings of the CMA could also impact property taxes for the homeowner.
Tips for Explaining the CMA Process
To explain the CMA process to clients, consider the following tips:
- Break down the CMA process into simple steps: Highlight how you’ve examined recently sold, currently listed, and expired properties in the same neighborhood or market area.
- Use visual aids: Provide graphs, charts, or tables displaying key data points and comparable properties to help clients better understand the CMA.
- Discuss relevant factors: Point out the property features and market conditions that affect your client’s home value, such as square footage, location, and market trends.
Strategies for Addressing Client Questions
Before meeting with clients, prepare yourself to address their questions and concerns about the CMA. Here are some strategies:
- Predict possible questions: Anticipate the common questions clients may ask about the CMA process, and prepare concise and informative answers.
- Stay updated on market trends: Continuously educate yourself on local and national real estate trends to address market-related questions.
- Set the stage for discussion: Encourage your clients to ask questions, and listen carefully to their concerns. Respond thoughtfully and honestly, using your knowledge and expertise to support your answers.
By employing these strategies, real estate agents can effectively present the CMA to clients, helping them better understand their property’s fair market value, which in turn, aids in making informed decisions. Keep the communication clear, concise, and informative to ensure the best possible experience for your clients.
In summary, conducting a Comparative Market Analysis (CMA) involves the following key steps:
- Gather subject property information, such as size, location, and condition, from sources like the MLS (Multiple Listing Service) and county tax records.
- Identify comparable properties by considering neighborhood, size, age, and features. Focus on recently sold properties and active and pending listings for a comprehensive market view.
- Analyze the comparables to determine the property’s fair market value. This can be done by comparing sale prices, price per square foot, and other relevant data.
- Adjust for differences between the subject property and comparables, such as unique features or upgrades, to refine the estimated value.
An accurate CMA helps real estate agents set appropriate asking prices for their client’s properties. Additionally, it can be a valuable tool when working with buyers, enabling agents to provide pricing insights and guidance. Accurate CMAs may also help reduce the risk of appraisal issues and lengthy negotiations.
As a real estate agent, understanding the importance of conducting thorough CMAs can positively impact your success in both attracting and closing deals. Properly performed CMAs show your expertise and knowledge of the market, and can also help establish trust with clients, ultimately building long-lasting relationships.
Would You Like To Partner With Me?
I’ve helped hundreds of real estate agents, team leaders, & brokers all over the country increase their sales, online presence, and create scalable systems. I would love the opportunity to work with you. Together, we can make this year your best yet!
Brilliant! Thank you for sharing!
You should probably visit the home before you try and create an evaluation of price. Also don't take other peoples word for square footage, you don't want to get sued.
I always go with the tax records. Why would anyone just take someone’s word on the sf?
I don’t always go with the tax records as they are sometimes wrong. Especially, if the home is older and there have been additions made. But yes, I’d start with the tax records if no other info is available. I’d also ask the seller for the most recent appraisal they have as that should have the correct sqft.