What's a CMA?
A CMA, or Comparative Market Analysis, provides the estimated value of a subject property. These reports help Sellers set listing prices for their homes, and help Buyers make competitive offers in the marketplace. The method used is called 'the direct sales comparison approach', which selects past and current prices of similar properties in the same neighbourhood. To start a CMA, the REALTOR® will note the subject property's style, size - particularly the liveable space, # of bedrooms and bathrooms, age, type of construction, landscaping, finishes, upgrades, updates, and overall condition.
A CMA should not be confused with an Appraisal. Although quite similar, CMA's are usually created by a REALTOR®. Whereas an appraisal involves a licensed appraiser, who is normally working for a lending institution. More specific information and detail might be used in the appraisal, and factor in other types of 'approaches'.
With the established criteria noted, a REALTOR® will conduct a search via their MLS system - which is an extremely valuable computerized source of information that REALTORS® rely on to trade in real estate. Usually, five or more sales, and current listings, will be explored to arrive at an estimated price. Each property, although similar, may also be different in some ways. When this happens then monetary adjustments will be made up or down from the sale prices, or list prices. For instance, if a home sale has a finished basement, but the subject property does not, then the sale price will be adjusted downwards. These adjustments continue for other differences, and the REALTOR® will create a grid to compare pricing. From all of this, a fairly tight estimate can be deduced for the subject property.
Another item to ponder is 'market trends'. Up to this point, the comparable properties are either past sales, or active listings. Is there a prediction for the future? Sometimes, guidelines can be established. For instance, if interest rates have been consistently going up or down, then a Buyer's borrowing power is affected, and listing prices should be adjusted accordingly. And, political events could impact consumer thought processes which may alter the market. Also, is the area around the subject property changing in some way? A new school being built might cause a rise in pricing, but a noisy factory being built in the farmers field behind you might lead to a decrease.
And, be a little leery of the '30 Second Evaluation' being advertised online - provide a few details, and presto, a price is emailed to you almost instantly. If you're looking for a wide ballpark guesstimate within a $100,000 or more of your homes actual value, then by all means follow through with it. But, if you're serious about moving, then getting an actual REALTOR® on your side, who will make a proper walk-through, collect more specific information, and then assess accordingly, is the better path for you.
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