Home Pricing Evaluation
What is a Comparative Market Analysis (CMA)?
No two homes are identical. This is why selecting an appropriate list price (i.e., sales price) for a home can be challenging, especially since the selected list price can have a huge impact of the success of the sale. If the price is too high, buyers are turned off and do not even bother making an offer, resulting in the home sitting on the market longer than necessary as the price is reduced from week to week. And, if the price is too low, the seller is leaving money on the table and not getting the best value for their home.
Sellers also need to be aware that automated home valuation models (such as Zillow's "Zestimate") are often wildly inaccurate. They simply cannot consider a number of factors that can only be determined by an actual Realtor that has view the home and knows the neighborhood. This is why it is crucial that every home owner request a home pricing evaluation (a.k.a. "Comparative Market Analysis" or CMA) before putting their home on the market.
How is a CMA created?
CMAs (i.e., pricing evaluations) are generated buy combining the Realtor's actual expert knowledge of the home and neighborhood and the power of sophisticated computer software that works with the multiple listing service (MLS). The MLS is available to licensed Realtors, such as myself, who pay dues to gain access to the service’s public and proprietary data, including tax roll information, sold transactions, and listings input by all cooperating MLS members.
As a listing agent, I generate CMAs for my sellers, and as a buyer’s agent I create them for my buyers. You can expect that in a transaction, both sides know what current market conditions are for the homes they’re interested in comparing.
How accurate are CMAs?
The CMA is a here-and-now snapshot of the market, based on the most recent data available, but it can instantly be rendered obsolete by a new listing, or a change of status in a home with the same criteria. Why? The market is constantly changing – new listings, pending sales, closed sales, price reductions, and expired listings.
CMAs can vary widely, depending on the knowledge and skill of the person inputting the search parameters to the software as well as the number and type of data fields that are chosen. That means some features may not be included.
How CMAs can vary.
CMAs vary greatly depending on the search parameters that are input by the real estate professional, by type of home (detached vs. attached), postal code or by street, number of bedrooms, baths and living areas, square footage, and numerous other search criteria.
They also tell you which homes have recently sold - six months, three months, one month, and which homes are currently on the market in the area and price range you’re interested in. As many fields of information as there are, some criteria simply can’t be listed in a CMA. If the MLS has a field for “ocean views,” you’ll know. But if not, you’ll have to learn more in the remarks section that is filled in by the listing agent. There you might find “great views.” But who is to say what makes a great view?
CMAs results may vary even between identical homes.
One property may simply offer better drive-up appeal or is in better condition than the other, and that will be reflected in the sales price.
Last, buyer and seller motivation can’t be quantified. You don’t know why a seller agreed to take less for their home or why a buyer paid more for another home. Family problems, corporate relocations and other reasons all play a role. What you can learn from the CMA is how long the home took to sell. If it was quick, the seller was highly motivated. If it didn’t, it was probably overpriced.