How to do CMA of a house?
Comparative analysis is a method used by realtors and homeowners who want to sell or buy a property by comparing it with other properties in the area. The method used for comparative analysis is to check the active or recently sold listings in the area, which are much like their own.
What is CMA?
Comparative Market Analysis or CMA in short, is used by real estate experts. As mentioned above, it’s an estimated value of your home. Remember, it’s not an appraisal rather a calculated estimated value with realtor tools by providing you a detailed report comparing your property with other properties in the area. This may include Sold listings, Active listings, Pending sales and Expired listings.
What this report contains is the list of Active listings, Recently sold and expired listings within your area. A realtor will try to find a property identical to yours or as close as possible, but sometimes it’s difficult to find an identical property in the area. CMA is purely an estimated value based on the comparables, but it can give you a close idea of the listing or property which you want to buy(in case of a buyer).
How is CMA done?
CMA is a subjective way to find the value of your property. It may be limited by comparing properties in your own area but sometimes your realtor may have to go a few miles away to find comparables as he may not find them in your area.
If you or your realtor find a satisfactory home or property compared to your home in your area it’s good! But if not then you might want to search comparables in other areas. The factors to compare are:
Number of bedrooms/bathrooms
Type of construction
Type of landscape
Amenities (Swimming pool / Workshop/ Big garage)
(House being compared)
Your house 2 floor 2900 sqft with 3 bedrooms, 3 bathrooms, no workshop, Huge garage, no swimming pool, 10 years old, Renovation needed minor (basement bathroom needs new cupboard) Good landscape, 10000 sqft lot (not sub-dividable) Hardiplank without stones in the front.
$500000 ÷ 3000 = $167/sqft 2900 x $167 = $484300
4 Bedroom 3 bedroom = -8000
4 Bathroom 3 bathroom = -6000
Workshop No workshop = -8000
No garage Huge garage = +5000
Swimming pool No swimming pool = -10000
No renovation Renovation needed= -500
Lot is 6000 sqft Lot is 10000 sqft = +25000
Stone in front No stone in front = -2500
Good landscape Good landscape = 0
10 years old 10 years old = 0
$500000 sold price CMA = $479300
We have taken:
$8000 to build a bedroom
$6000 to build a bathroom
$8000 to build workshop
$5000 to build garage
$10000 to build swimming pool
$500 to put cupboard
$2500 to install stone
$25000 for extra 4000 sqft lot
(illustration only info here can’t be relied upon)
Now from above example, we saw things to consider doing CMA are as follows:
Age and Square footage of the house
Size of Lot/Land
Number of stories of the home
Extra features swimming pool, Fireplaces etc
Location and Landscape
Style and construction of the house
Renovations needed or not
Now let’s get into details of CMA:
Sold listings: Your realtor may look at the listings sold similar to your house. He will search local MLS© and get all the listings sold within the last six months in your area, but if there is nothing sold in the last six months in your area he may go back one year to find a sold listings or he may go within a few miles around your location to find the sold listings. Then he will sort them out and try to find homes similar to yours. What this does is give the realtor a general idea about the market and what price the homes selling similar to your house are.
Active listings: Number of active listings are also important but can’t be entirely relied upon. A desperate seller may list their house for less than the actual price for a quick sale as compared to other active listings in the area whose seller wants a higher price thus willing to wait. Market conditions are the main factors deciding the value of your house depending on if it’s a buyer’s market or a seller’s market.
The best way is to compare it with the most recent sale of homes in your area going back weeks or months as similar to your own house.
Pending sales: These are the ones sold but still waiting for subjects to be removed or waiting to clear some other hurdles (like in the case of rental waiting for the tenants to move out, or financing, etc.) before it can be transferred to the new owner.
It’s all confidential information, so only the agent which is buying or selling will know about it. It will become public once the sale is finalized after removing the subjects.
Local realtors are knowledgeable and may have idea about the price of these pending sales, so it’s always a good idea to get a local realtor for buying and selling.
Expired listings: These are important in CMA as it gives you an exact idea why a listing of a particular house was expired. For example, maybe it was listed for a higher price than the market value, or the condition of the property itself.
You may find an expired listing and compare it to your house as it may give you a clear idea about the price of your house and what you may want to list it at.
Gathering data from local MLS:
As an average homeowner, it may be difficult for you to find all the data and try to understand it. You definitely need a professional realtor to explain what it means and where the market is going.
There are also a few real estate websites (Zillow.com, Rew.ca, Trulia.com, homeZfinder.com) which makes your homework easy to get an idea about the value (CMA) of your home. Some of these sites have online tools to do an automatic CMA which makes your life easy.
After gathering all the data, it’s you or your realtor’s choice to dig deep and find your home value as close as possible. It’s not easy work and may take a few hours to a full day to get a good idea about the value of a house.
For a homeowner, it’s a good idea to drive around to look at the house which he is comparing his house with. For a local realtor, it’s easy because he knows the local market and he may have done a showing of that particular house. It’s always a wise decision to let a professional local realtor do CMA.
Many realtors offer free CMA reports.
Age of Construction:
Age is one of the biggest factors in determining the value of your home. Older homes may require renovations and newer homes may be built with new technology with high efficient equipment, energy star rating windows with good insulation, etc.
Older homes may be historic and may have more privacy with a big private backyard, which may contribute to their high value.
Square feet of the house is important as the cost of building a bigger house is more, but there is a limit to it. The cost doesn’t increase after a certain size. This may be due to a limited number of buyers for huge houses than average homes. The average house between 2100 to 2600 sqft 2 story houses with basement is always in demand and retain its value.
Attractions of the house:
Swimming pool, Number of fireplaces, garage, and big workshop are also contributing factors to increasing value of the house.
New roof, Windows, Paint, Furnace, Water tank, Flooring are also big contributing factors to increasing value of an older home.