What is a Comparative Market Analysis?

What is a Comparative Market Analysis?

A Comparative Market Analysis (CMA) is a tool used primarily in real estate by agents and brokers to estimate the value of a property. It involves evaluating similar properties that have recently sold, are currently on the market, or were on the market but did not sell, within a specific area and time frame. The analysis allows the assessor to determine a fair market value for a property by comparing it to similar properties with comparable characteristics.

Here's how a CMA is typically structured:

  1. Selection of Comparables: Properties selected as comparables should be similar to the subject property in terms of size, condition, location, and features. This includes factors such as the number of bedrooms, bathrooms, lot size, and the type of property (e.g., single-family home, condo).
  2. Adjustment of Values: If the comparables are not exactly like the subject property, adjustments are made to their selling prices. For example, if a comparable property has a renovated kitchen and the subject property does not, the price of the comparable is adjusted downward.
  3. Current Market Trends: The analysis also considers the impact of current market conditions, such as trends in housing demand, supply, and interest rates, which affect property values.
  4. Final Valuation: Based on the data from comparable properties and market conditions, a suggested market value or price range for the property is established.

A CMA is an essential document for both sellers and buyers. For sellers, it helps in setting a competitive listing price that aligns with the market, avoiding overpricing or underpricing. For buyers, it provides insight into whether a property is priced fairly before making an offer. Unlike a formal appraisal, which is typically conducted by a licensed appraiser, a CMA can be created by a real estate professional and does not have the same legal standing as an appraisal.

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