How to write a CMA – Competitive or Comparable Market Analysis?
In residential real estate, a CMA is an opinion of value made by a licensed real estate agent. The analysis compares recently sold properties to a subject property. Many real estate agents believe that pricing a home is both an instinct and a science. There are many small nuances that impact the end result of how a real estate agent values a home.
How do you create a Comparable Market Analysis for your client?
Subject Property:
First, note the characteristics of the house you are trying to define a value to.
- Number of bedrooms
- Number of bathrooms
- Liveable Square Footage
- Year built
- Number of levels
- Finishes
- Garages/Parking
- Updates/Upgrades/Condition
- Style (see commons styles defined below)
- Amenities
Typical of Homes Styles You Could Write a CMA for:
A-Frame: This style is a distinctive architectural style characterized by its steeply sloped roof that resembles the letter “A”. The design typically features open interior space, large windows, and is often timber built with natural materials.
Bungalow: Designed with most of the living space on the main level for more single level lining, Bungalows often feature a wide front porch and a simple, functional layout. Bungalows often have low-pitch roofs and a second story loft area, often referred to as a “bungalow with a dormer”.
Cape Cod: A classic American architecture style that originated in New England, look for a steeply pitched roofline, dormer windows, symmetrical facade, with a more open floor plan on the main level. Cape Cod homes are often smaller in size and layout.
Craftsman: Look for a broad, low-pitched gable roof with overhanging eaves. Emerging in the 20th Century, Craftsman frequently showcase exposed wooden beams, decorative brackets, and predominate large front porches. Inside you’ll see more decorative wood paneling, coffered ceiling and built-in fixtures.
Colonial: Characterized by its symmetrical design and classic features, with evenly spaced windows and centrally located front door. Colonials date back to early America and can be two to three stories. There is a large range in how simple or elaborate they can be.
Mid-Century Modern: Made popular between 1940 and 1960, this style has clean lines, open spaces, sleek lines and geometric forms that emphasize function and minimalism. They have flat or low-pitched roofs, and the possibility of sunken living rooms.
Ranch: A popular single-story design with a long, low profile and open floor plan. They have varied rooflines, with the possibility of gables or extended eaves.
Split Level: You will notice that these homes have staggering floor levels, with the main level as well as the front door being halfway between the upper and lower levels.
Victorian: Built during the reign of Queen Victoria (1837-1901) and are most characterized by their complex, steep, multi-gabled roofs. You’ll see ornate trim and decorative moldings, tall windows and wide porches.
Choosing Which Homes to Include as Comparable Sold Homes in Your CMA
While a CMA is only an opinion and not a formal appraisal, real estate agents follow similar guidelines and practices.
- In your MLS, pull up your subject property. Often in the listed view, you can choose to do a search within a radius of the subject property. Homes that are closest to the subject are weighted as better comparables than ones further away. Do not go any further than 1 mile in radius from the subject property.
- Next in the search window, narrow the search with these weighted in order of importance.
- Square footage range. Start with approx 1000 square feet in range. For example, if the subject property is 2300 square feet, search for closed sales of a range of 1800-2800. If you do not have enough comps, broaden the range slightly. Be careful to only attempt to match liveable square footage. A home with a dirt basement is not the same value as a home with a finished space below.
- Number of Bedrooms. Often it is easy to match bedroom to bedroom, but in the event it doesn’t, you will need to adjust your evaluation. For example, if a house is 2 bedrooms and the only comps you can find are 3 bedrooms, you will need to adjust your value opinion down based on what demand the region has for 3 bedrooms instead of 2. If you don’t know, ask your manager or an experienced agent
- Number of Bathrooms. Similar to bedrooms, you will want to adjust based on fixture count. Depending on the finishes, adjust up or down based on fixture count. One fixture could be adjusted $3,000-$5,000. If you are comparing a home that has an extra half bath, you would adjust it down $6,000-$10,000 (2 fixtures – toilet and sink).
- Style and Age. As mentioned, you cannot compare a one level ranch to a 3-story Victorian that have the same square footage and bed/bath count, as these homes live very differently and are in demand based on that feel and flow. You also cannot compare new construction with an unaltered 1970 home.
- When pricing a home to list, you will want about 10 comparable homes. In those, choose 3 that are the best comparables. When representing a buyer, before writing an offer, you will want to do a basic CMA and choose at least 3 comparable homes to identify value. An appraiser will want to see at least 3 and, on jumbo loans, 6 homes. You will want to have one home below of less condition, one a good match to the subject, and one of higher value and better condition than the subject property.
Other indicators to review before giving your analysis.
- Pull your market trends report from MLS for the property zipcode. You could also find this information on RPR if you are a Realtor®. On it, find the following information.
- MOI – Months of Inventory
- DOM – Days on Market
- Median Sold Price
Depending on who you are representing (buyer or seller) this information will dictate what advice you give them on values. Months of inventory will tell you if it’s a seller controlled or buyer controlled market. Median Days on Market will tell you how quickly a buyer will need to move on an offer, or how long the seller will need to wait for an offer if priced correctly. Median Sold price (not average) will tell you if you’re in the ballpark with your above CMA defined price.
Your client, either buyer or seller, is paying a premium commission to you because you have a pulse on the market. That means that you should always have a feel for what the market is doing, which side controls it and how you can get your client the best price at the best terms. CMAs and real estate home price analysis is a craft that must be constantly refined and learned throughout a real estate agent’s career.
