Deep Dive on CMAs

Introduction

This tutorial will guide you through the essentials of Comparative Market Analyses (CMAs) in real estate. Understanding CMAs is crucial for accurately pricing properties, whether you are a buyer, seller, or real estate professional. By the end of this guide, you will have a solid grasp of how to perform a CMA and the key factors to consider.

Step 1: Understand the Purpose of a CMA

• A CMA helps determine the fair market value of a property by comparing it to similar properties.
• It is commonly used by real estate agents to advise clients on pricing.
• Key reasons to perform a CMA include:
  • Setting a listing price for sellers.
  • Assessing property value for buyers.
  • Supporting property evaluations for investment decisions.

Step 2: Gather Data on Comparable Properties

• Identify properties that are similar in size, location, and features to the property in question.
• Use online real estate databases, MLS listings, and local property records to gather data.
• Focus on the following criteria when selecting comparables:
  • Location: Within the same neighborhood or area.
  • Size: Similar square footage and lot size.
  • Features: Comparable bedrooms, bathrooms, and amenities.
  • Sale Date: Preferably properties sold within the last 6 months for up-to-date pricing.

Step 3: Analyze Comparable Properties

• Create a table to compare key attributes of each property, including:
  • Address
  • Sale price
  • Square footage
  • Days on market
  • Condition and upgrades
• Calculate the average price per square foot for your comparables to gauge the market trend.

Step 4: Adjust for Differences

• Make adjustments to the sale prices of comparables based on differences in features:
  • If the comparable has an extra bathroom, increase the price of your subject property.
  • If your property has a larger lot size, decrease the price of comparables accordingly.
• Use a systematic approach to quantify adjustments, ensuring they reflect market perceptions.

Step 5: Determine the Value Range

• Based on your analysis and adjustments, establish a price range for the subject property.
• Consider the lowest and highest adjusted prices from your comparables.
• This range gives you a realistic expectation of what the property should sell for.

Step 6: Present Your Findings

• Prepare a report that summarizes your CMA findings, including:
  • A cover page with property details.
  • A comparative analysis chart.
  • Justifications for your price range based on data.
• Use visuals such as graphs or charts to make the information more digestible.

Conclusion

Conducting a CMA is a fundamental skill in real estate that empowers you to make informed pricing decisions. By following these steps, you can ensure that you have a comprehensive understanding of the market value of properties. As a next step, practice conducting CMAs on different properties to refine your skills and gain confidence in your analysis.