Creating a CMA

Here are the steps to follow when creating a comparative market analysis (CMA) for a home you are trying to price for the market:

Step 1 - Map it out: Determine the geographic area and property type you are comparing. In addition to the traditional factors that affect the price of a home, such as location, square footage, and condition, there are other considerations that can impact the value of a property.

One such consideration is the view from the property. Homes with scenic views, such as waterfront properties or those with mountain or cityscape views, can often command a premium price. On the other hand, homes with undesirable views, such as those facing a busy street or a neighbor's unattractive backyard, may be priced lower.

Another consideration is the property's proximity to green spaces, parks, and other amenities. Properties that back onto green spaces or have nearby access to parks and recreational facilities may be more attractive to buyers, which can drive up the price. Similarly, properties that are located in desirable school districts or have easy access to public transportation may also command a higher price.

Other factors that can impact the value of a property include the age and condition of the home, the quality of the neighborhood, time adjustment and the availability of nearby shopping, dining, and entertainment options. When evaluating the price of a home, it's important to take all of these factors into consideration in order to get an accurate picture of the property's value.

Also, ensure that you are comparing properties with similar features, such as the number of bedrooms, bathrooms, square footage, age of the property, and other relevant factors.

Step 2 - Gather Data: Collect data on recently sold properties in the area that are similar to the subject property. You can use online resources like MLS listings, public records, or other real estate websites to gather this information.

To effectively compare the subject property with recently sold properties in the area, you should gather data on several key factors such as:

Location: Look for properties in the same or similar neighborhoods, as well as those in close proximity to the subject property.

Size and layout: Gather data on the number of bedrooms, bathrooms, square footage, and overall layout of the homes you are comparing.

Condition: Note any differences in the condition of the properties, including upgrades, renovations, or repairs that have been made.

Age: Compare the age of the subject property to those recently sold in the area.

Lot size: Gather information on the size of the lot for each property being compared.

Sales history: Look at the sales history of the properties to determine if they were sold recently or if they have been on the market for an extended period of time.

Sale price: Note the final sale price of each property, as well as any concessions made during negotiations.

By gathering data on these factors, you can create a comprehensive comparison of the subject property with those recently sold in the area, which can help you determine an accurate price range for the subject property.

Step 3 - Analyze Comparable Properties: Review the data collected and select properties that are most similar to the subject property. Analyze these comparable properties by looking at their sold price, days on market, features, location, and other relevant factors.

To analyze comparable properties, you can follow these steps:

Review the data: Look at the data collected for each recently sold property and create a spreadsheet or chart to help organize and compare the information.

Identify similarities: Identify properties that have similar features, such as number of bedrooms and bathrooms, square footage, lot size, and location.

Find 3 Comparables: It's recommended to gather 3 comparable properties when determining a list/sale price for the subject property. Utilize feature sheets provided by the board to create worksheets for each property, and print the Agent Detail Sheets from our MLS. Analyze the comparables and highlight any differences they have from the subject property. Make notes of any details that need to be considered and make adjustments accordingly. For example, if the subject property has a new kitchen while the comparable property does not, determine the added resale value of the newer kitchen. This can be done by researching other homes or understanding the value of the feature.

CMA Consideration for a Condominium

It's important to take all relevant factors into consideration and adjust accordingly to arrive at an accurate market value for the subject property.

Look at days on market: Review how long each property was on the market before it sold. If a comparable property sold quickly, it may indicate that the price was competitive.

Consider location: Take into account the location of each comparable property, such as proximity to schools, transportation, or other amenities, and adjust the sold price accordingly.

Evaluate features: Look at any additional features that may have affected the sold price, such as a pool, fireplace, or upgraded appliances.

Determine a price range: After analyzing all the comparable properties, determine a price range for the subject property based on the data collected and adjusted for any differences.

By following these steps, you can analyze comparable properties and determine an accurate price range for the subject property.

Step 4 - Make Adjustments: Adjustment  Values  Make adjustments to the comparable properties based on differences in features or condition, which may affect the value of the subject property. For example, if the subject property has a larger lot size or better views than the comparable properties, you may adjust the price accordingly.

Here's an example of how to make an adjustment for a different feature:

Identify differences: Look at the features and conditions of the subject property and the comparable properties, and identify any differences that may affect the value.

Determine adjustments: Determine the adjustments that need to be made to account for these differences. For example, if the subject property has a larger living area than the comparable properties, you may adjust the price accordingly.

Adjust for differences: Note any differences between the subject property and the comparable properties, and adjust the sold price accordingly. For example, if a comparable property has a larger lot size, it may have sold for a higher price than the subject property.

Factors to Consider When Adjusting: When making adjustments to comparable properties, it's important to keep in mind that the subject property should always remain constant. Plussing (+) may be necessary if the subject property has features or upgrades that are not present in the comparable properties. For example, if the subject property has a new kitchen and a comparable property does not, you would add the value of the new kitchen to the comparable property to make it more similar to the subject property.

On the other hand, minusing (-) may be required if the comparable properties have features or upgrades that the subject property does not have. For instance, if a comparable property has a larger garage than the subject property, you would subtract the value of the larger garage from the comparable property to make it more comparable to the subject property. 

Use market data: Use market data to determine the appropriate adjustment amount. For example, if similar properties in the area with larger living areas sell for $100 more per square foot on average, you may use this amount as your adjustment.

Evaluate other factors: Consider other factors that may affect the value of the subject property, such as condition, age, and location. Adjustments may need to be made for these factors as well.

Determine a price range: After making adjustments to the comparable properties, determine a price range for the subject property based on the adjusted sold prices of the comparable properties.

By following these steps, you can make adjustments to the comparable properties and determine a more accurate price range for the subject property based on a different feature, such as living area.

Step 5 - Determine the Market Value: Based on the analysis and adjustments, determine an estimated market value for the subject property.

Step 6 - Provide a Report: Use your local boards CMA program to compile your findings and present them in a report that includes the comparable properties, adjustments made, and the estimated market value of the subject property. This report can be shared with the seller to help them understand the value of their property in the current market.

Here are a few ways to present the determination of the estimated market value for the subject property:

Comparative Market Analysis (CMA) Report: A CMA report is a commonly used document in real estate that includes an analysis of comparable properties, adjustments made, and the estimated market value for the subject property. This report can be presented to the seller or buyer as a formal document.

Summary Sheet: Create a summary sheet that outlines the main findings of the analysis, including the comparable properties used, adjustments made, and the estimated market value for the subject property. This can be presented as a one-page summary that is easy to read and understand.

Verbal Presentation: Meet with the seller or buyer in person to go over the analysis and adjustments made, and to present the estimated market value for the subject property. This can be a more personalized approach that allows for questions and discussion. Not the best way to present value, but if you know the client and they are listing with you, it may be the way it gets done. 

No matter how you choose to present the estimated market value, be sure to explain the process and factors that were taken into consideration, and provide supporting data and evidence to justify the value.

Additionally, you may want to include any relevant information about the local real estate market and trends that may affect the value of the subject property. It may also be helpful to include a summary of the analysis and the rationale behind the adjustments made to the comparable properties. This can help the seller understand how the estimated market value was determined and build trust in your expertise.

Remember, always have a printed version for your records. If your work comes into question, you will have available the value you resented and what was included.