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Comparative Market Analysis (CMA) is a type of market analysis that compares the current prices and values on one or more markets with those of other similar markets. It provides information about how these different measurements compare to each other.
A comparative market analysis (CMA) determines the worth of your property by comparing it to the sales prices of comparable properties in your neighborhood. This information aids buyers in evaluating asking prices and enables seller representatives to select a listing price for their clients. All real estate brokers should utilize CMAs as a tool to guarantee a fair transaction.
What is the definition of comparative market analysis (CMA)?
A comparative market analysis (CMA) is a document that compares the prices of comparable houses in the region to determine the worth of a seller’s property. A real estate agent uses the average price of previously sold, active, and expired properties that are similar to the property presently being sold by the agent to generate a CMA (also known as “comps” in the business). CMAs are often utilized by seller agents to establish a home’s listing price, but they may also be used by buyer agents.
When Is a CMA Required?
In real estate, there are two main scenarios in which a CMA is required:
For a Seller Listing Consultation
In order to obtain a feel of a home’s worth before a listing appointment, you should always prepare a CMA. Having a CMA on available means that you can answer the homeowner’s market value inquiries and shows that you’re always prepared. Then, following the appointment, run an updated CMA to include what you learned while touring the house with the homeowner in the area.
When a buyer is looking for a good deal,
Another occasion to use a CMA is to assist a buyer in determining whether or not a property they’re interested in is a good bargain. A comprehensive CMA can inform you whether a property is priced correctly if you’re just starting out or working in a new region.
How to Conduct a Market Comparative Analysis
Start by analyzing the quality of the area, assessing accessible information about the home, and looking at property value estimates online to produce a comparative market analysis (CMA) that contains relevant similar properties for both buyers and sellers. Then, to create a value comparison, choose homes that are comparable to your listing and compute an average price per square foot.
The following are the eight stages to generating an accurate CMA:
1. Evaluate the neighborhood’s quality
The first step in compiling your CMA after obtaining a listing appointment or FSBO recommendation for a home is to evaluate the quality of the surrounding area. You won’t be able to fully evaluate the house until you visit it in person, but a short internet search of the area can help you prepare for the meeting.
Use a lead management platform like REDX to get a steady stream of quality FSBO leads. It looks for houses posted as for-sale-by-owner in hundreds of ads, websites, and other places, and discovers missing contact information to make it simpler for you to contact them. It also includes an auto-dialer that connects you exclusively with ready-to-talk FSBO prospects. 
Google Street View will provide you with nearly all of the information you need about the area around your prospective listing. Here are some things to keep an eye out for to get a sense of the area:
- Blocks that are nice vs blocks that aren’t so nice
- Proximity to facilities such as beaches, parks, and schools, among others.
- Garbage dumps, roads, industrial sites, and other undesirable places are close by.
- Significant problems with curb appeal
Keep in mind that Google’s pictures may be out of the current, so if your schedule allows, you should drive about the area before your listing visit.
2. Examine the first listing (if Available)
After you’ve gotten a feel for the area, go online and search for the property’s initial listing. If it’s still online, it should offer you a sense of the property’s advantages and disadvantages. Examine the pictures and description carefully to determine the home’s age and condition, recent improvements, and any possible problems with the prior real estate marketing approach. This is also a fantastic method to figure out who built the house and if it was custom or more cookie-cutter.
3. Use Zillow and HouseCanary to get property value estimates.
A property value estimate may assist you in determining the probable market worth of your client’s house and provide a starting point for estimating the property’s cost per square foot. Estimates from Zillow and HouseCanary, on the other hand, maybe incorrect and do not provide agents with a comprehensive picture of the local market. As a result, it’s critical to use these numbers as a beginning point for your CMA.
Start with the Zestimates from Zillow.
Real estate brokers, homeowners, and prospective purchasers may use Zillow’s Zestimates tool to find out how much a property is worth. Because Zillow dominates the real estate listings sector, your customers are likely to have already looked up their home’s Zestimate. As a result, when your homeowner brings up the Zestimate, you must be prepared to respond.
An example of a Zillow Zestimate
It’s worth noting, however, that Zestimates are based on a limited number of tax records and data entered by agents. Furthermore, since Zestimates maybe 20 percent to 30 percent wrong, you should only use them as a guideline rather than a precise estimate. Zillow, on the other hand, is extremely open about its limits, publishing state and county-specific accuracy ratings online.
Here’s how accurate Zillow Zestimates are in key American cities:
Use HouseCanary to get a CMA valuation and value forecast.
HouseCanary is a Google Ventures-backed home valuation business that provides national values with a Median Absolute Percentage Error (MdAPE) of just 4.4 percent. This implies you may obtain a valuation that is quite near to market value and use it to support your own analysis.
Even better, HouseCanary provides value predictions for the next three years. While this information is more helpful for purchasers who want to know how much a property will be worth in the future, it may also be used by sellers to negotiate bids. If a buyer makes a lowball offer, for example, you may show them the three-year projection and run the figures to demonstrate why your listing price is correct.
4. Begin working on your preliminary CMA.
Open your multiple listing service (MLS) platform or Cloud CMA once you’ve assessed the area, looked at prior listings, and looked up value estimates. Cloud CMA, for example, uses MLS data to generate visually appealing reports that may be displayed on tablets, seen online, or saved as PDFs and printed to leave with the homeowner.
To begin your preliminary CMA, evaluate sold listings, expired listings, current listings, and pending listings in the region that are similar in features, size, and amenities to your property to get a general sense of its worth. Although various MLS systems use different back-end technologies, there are certain basic principles you should follow when sorting listings in your MLS to locate similar properties.
You should include the following comparable properties in your CMA:
Look at homes that have sold, expired, are pending sales, or have been listed.
Sold listings can tell you precisely how much comparable houses in the neighborhood have recently sold for, and they are the best method to determine the worth of your CMA. Expired listings will inform you what price the market won’t accept. You may get a decent sense of what comparable houses are selling for right now by looking at listings with pending sales. Current listings can give you an idea of who your competitors are.
Compare and contrast homes with the same number of bedrooms and bathrooms.
One of the most significant factors for valuing a house is the number of bedrooms and bathrooms. Two-bedroom houses, for example, are less attractive than those with three or more bedrooms. Similarly, houses with just one bathroom or no master bath have a lower resale value than those with several bathrooms.
Examine Homes Within a 300-Square-Foot Radius
Look at houses that are between 1,700 and 2,300 square feet if your home is 2,000 square feet. More bedrooms usually mean a greater price, but square footage is almost as essential. Bedrooms, after all, maybe simply added or deleted from a home’s listing description. Dining rooms, dens, and offices, for example, may all be classified as “bedrooms” provided they satisfy the legal definition of a bedroom according to your local building code.
Compare and contrast homes in the same neighborhood.
If the house isn’t in a gated community, determining what “neighborhood” it belongs to may be challenging. As a result, it’s critical to do an internet assessment of the area beforehand. Look for what the residents consider the neighborhood’s borders. Geographic factors such as railway lines, roads, and retail areas may also serve as community boundaries if there is no universal agreement.
Compare and contrast homes in the same or similar school zones.
School districts are particularly significant in bigger cities because each district has a high number of schools. Kids who reside on one side of a street may attend high-quality schools, while students who live on the other side may attend lower-quality schools. Because the difference may add or subtract a lot of value from a property, you should constantly double-check the MLS because borders can change.
Examine houses on similar-sized lots to yours.
In general, a house on 10 acres of land will be valued more than a home on only one acre. If the house is in a community, the majority of the lots will be comparable in size. Keep an eye out for houses on bigger corner lots or in more desirable cul-de-sacs.
Examine homes that were built within 10 to 25 years of yours.
New houses are usually more expensive than older homes, although certain older properties, particularly antique or mid-century modern homes, may demand a greater price than new construction due to their design. Furthermore, new development may be high-end, low-end, or similar to current inventory, depending on the changes that have occurred in the area. If you don’t know much about the area, get the help of a coworker who does.
Examine Houses With Similar Amenities to Yours
It’s important to examine houses that offer the same facilities, either on-site or in the area, in addition to comparing homes with comparable characteristics. If the property includes an in-ground pool or is located in a gated community with a clubhouse, look for comparable properties that have similar amenities. Similarly, if the house is located on beachfront land, comparing it to other coastal properties will give much better results than comparing it to homes located a few streets away from the water.
5. Compile a list of comparable listings to get an average price.
You should have many properties that are approximately similar to your listing once you narrow down your search parameters. The next step is to divide the selling prices of the similar houses you’ve selected by their square footage to get the price per square foot for each one. Then multiply the average price per square foot of similar properties by the precise square footage of the property you want to sell.
For a 3,000-square-foot ranch, for example, start with five similar houses as follows:
- The first house, which measures 2,700 square feet and sold for $500,000 (price per square foot: $185), is the largest.
- Home number two is 3,200 square feet and sold for $525,000 ($164 per square foot).
- The third house is 3,300 square feet and costs $510,000 (price per square foot: $154).
- Home number four is 2,650 square feet and sold for $495,000 ($187 per square foot).
- Home number five is 3,100 square feet and sold for $515,000 ($166 per square foot).
These properties have an average price per square foot of $171.20. The average price per square foot multiplied by the square footage of your house (3,000) gives a home value of $513,600. This should be a reasonably realistic estimate of the selling price of your client’s house.
6. Examine the property in person
You should already have a decent sense of how much the house is worth based on your research, so you should be prepared to answer any property valuation inquiries the homeowner has for you. However, take a tour of the house to find out if there are any hidden problems that may influence the selling price. Use this chance to inquire about recent repairs, improvements, or reported issues with the house from the homeowner.
Consider the following while visiting a property:
- Is the house in extremely bad or very excellent condition?
- Has the homeowner made any additions or upgrades, such as a swimming pool? Is there central air conditioning? Skylights? All new additions and amenities may have an impact on the value of a home.
- Consider if a new owner will need to make any substantial renovations, such as a new roof, new mechanicals, or other costly changes while visiting the property.
- Exterior and Landscape: Is the landscaping in good condition? This may also add to the value of the property. If there are any significant problems that weren’t obvious during your original investigation, such as outdated siding, foundation cracks, or other external difficulties, look for new comparable listings that better match the house in its present condition or modify the price per square foot to reflect the changes.
- Consider if the home is in a gated community, a golf community with a clubhouse and exercise facilities, close to shopping and eating, or has other desired features.
Combine preliminary data from similar listings with information collected during the visit to generate a complete CMA after you’ve seen the property in person.
7. Complete a final CMA for a potential client.
Create the final CMA to offer to your prospective customer after researching similar listings and seeing the property in person. You may either create a PowerPoint or Keynote presentation, download it as a PDF, and print it out to deliver in a binder, or you can utilize CMA software to present to your prospective client through web or tablet.
At the end of the day, it’s critical to display your CMA data properly, which includes high-resolution listing pictures.
8. Nurture top-of-funnel leads using CMAs
Keep the information from your CMA for future listings and transactions. Your report may help you discover and nurture “top of the funnel” seller prospects who are just getting started with their home sale. If you can run a CMA and pitch sellers before any other agents, they’ll compare every other pitch they get to yours, and if you do your job well, you’ll have a good chance of closing them.
Advertising home valuation landing pages on Facebook is one method to generate seller leads. The Home Valuation Tool from Real Geeks is an excellent method to create enough seller leads to fill your pipeline. Sellers will be notified that a CMA is the natural next step—and a more accurate method to estimate their property value—after receiving a house appraisal via your landing page. If they agree, you may contact them to set up a meeting and give them a customized CMA.
10 Pro CMA Advice + An Example CMA
The ability to produce useful CMAs and deliver compelling presentations may help agents get more listings and assist buyers in their home search. On how to take your CMAs to the next level, we gathered tips from renowned real estate agents, investors, and appraisers.
Here are some pointers for writing outstanding CMAs:
Smaller comps should be avoided
De Vivo Realty’s Jennifer De Vivo is a Realtor.
New agents often make the mistake of using comps that are all smaller than the subject property. Smaller comps may often distort the price per square foot and falsely increase the subject property’s price. A general guideline is that in the final comp mix, there should always be a smaller and somewhat bigger property. Another frequent blunder is failing to account for things such as the home’s condition, upgrading, pools, and other important locational considerations like being on a conservation lot vs being near a busy road.
Make sure your comps are similar.
Investfourmore.com was founded by Mark Ferguson, a real estate investor.
The CMA must be completed using comparable properties that are similar to the topic in terms of style, age, condition, kind, and location. The following are some helpful hints:
- Examine houses that are less than ten years old.
- Compare one ranch-style home to another ranch-style house.
- If feasible, utilize similar sales or listings in the same neighborhood as the topic, or within one mile if that is not possible.
- The subject home’s above-ground square footage should be within 20% of the total. Basements and above-ground square footage should be computed separately. A house with 2,000 square feet on the main floor and 1,000 square feet in the basement should not be appraised at the same level as one with 3,000 square feet on the main floor. In Colorado, for example, above-ground square footage may be modified by $40 or $50 per square foot, while completed basement square footage may be adjusted by $10 or $20 per square foot.
- Do not use the value of a prefabricated house to determine the worth of a stick-built home.
- Make sure you’re utilizing comparables with similar lot sizes if a house has a big lot (five acres or more).
Keep up with the latest technological advancements.
SparkRental Founder and Long & Foster Real Estate Realtor Denise Supplee
I use Trend (my local MLS) and Zillow for my CMAs. According to a Bloomberg report, the typical error margin between the actual selling price and the Zestimate is just 5%. This is down from 14% when it first began in 2006. I like utilizing both of these tools because I think they offer the most useful information to my sellers.
To get the most accurate value, go beyond square footage.
Realtor Doug Willis of up2dateRealEstate.com
Aside from the obvious factors such as beds/baths, square footage, and lot size, you must also consider the less apparent problems that may reduce market value. Is it in keeping with the rest of the home if someone adds 1,000 square feet on their property, or does it resemble an apartment building? Is the home still charming, or has it been renovated to suit the owner’s current poor taste?
A home on a busy corner or street, a floor plan with a bad design (such as walking through a bedroom to access another bedroom), and renovations that were last done in the 1980s are also less apparent indicators.
Other less apparent systems/construction improvements, such as new plumbing, a newer roof, insulation, and earthquake bracing, will add much more value than cosmetic renovations (kitchen and bathrooms). Because consumers are unaware of these changes, there is no “wow” effect or emotional appeal.
Don’t Let Your Data Analysis Get in the Way of Your Aesthetics
M.Carver Consulting, LLC, Marc Carver, Principal
Most MLS systems include software solutions that generate very polished reports. The most essential thing to remember while creating a successful CMA, regardless of the program utilized, is that the actual value is in the data and your interpretation of it. Of course, having a succinct, properly produced presentation is essential. However, don’t allow the “appearance” to take precedence over the data’s selection and interpretation.
Newer agents should be aware that a comprehensive report cannot be completed without a real-time market study of the properties that compete with their property. This current market information, when combined with your study of previous sales history of comparable properties, is critical in establishing your maximum list price suggestion.
Make sure your CMAs are simple to comprehend.
Skye Louis Realty Broker/Owner Desare Kohn-Laski
When preparing a CMA, good advice for novice agents is to make it as simple as possible for the seller to comprehend. If the CMA report perplexes you, the seller is likely to be perplexed as well. For CMAs, software like HouseCanary is an excellent place to start, but it’s also essential to consider other factors, such as improvements and the locations of recently completed transactions included in your CMA, to obtain the most accurate value possible.
In your CMA, display pricing trends.
Keller Williams Realty’s Kathryn Bishop is a Realtor.
In my CMAs, I include pricing trends, days on market, price averages, and medians, as well as information on all comparables. I suggest a listing price based on these considerations. My CMAs have proved to be very reliable. My sellers often compliment me on how accurate my research and price are. They understand that if they list their home at an inflated price, it will sit on the market for much longer and they will ultimately reduce their asking price in order to sell.
Simple Is Best
Yoreevo LLC’s James McGrath is a licensed real estate salesperson.
Sellers seek a straightforward description of their home’s value in simple English. I feel that comparing two or three comparable homes that have sold in the previous several months, showing the value range, and comparing them to the subject property is the simplest approach.
Most sellers believe their houses are worth more than they are, but when you show them a house down the street or an apartment above that is almost identical to theirs, they must explain why theirs is worth more. Staying anchored on a few key data points is a fantastic approach to get a consensus on a price.
Comps within 1 to 3 miles of your client’s home are ideal.
Mashvisor’s Marketing Director, Daniela Andreevska
It’s critical to locate properties—or comparables—that are as close as possible to your client’s property when performing a CMA. Also, try to find homes near to your client’s home—preferably in the same area and on the same street, or within one to three miles at most. This is the only way to ensure that your CMA findings are correct and that you provide your customer with the finest service possible.
Consider yourself an appraiser.
North Bay Capital’s President, Jesse Gonzalez
Understand the changes an appraiser would make to the comparables selected. Similar to what an appraiser would do, you must be precise when making changes to sold houses. For example, if you want to offer greater value to your customer, don’t make a $30,000 change for one bedroom. Explain why you’re making the changes and how you’re going about it. This is an excellent chance to demonstrate your knowledge.
Most Commonly Asked Questions (FAQs)
What Is a CMA Report and How Do I Get One?
A comparative market analysis (CMA) is a study used by real estate agents to estimate the market worth of a property. CMA reports contain information about comparable properties to a seller’s property, as well as the surrounding area.
What Is the Cost of a CMA?
Clients are usually not charged for CMAs by real estate brokers. Instead, a CMA will be prepared by a real estate agent for sellers before they market their property or for purchasers to determine if a home is worth the asking price. A real estate appraisal, on the other hand, costs between $300 and $400 and must be completed by a qualified appraiser.
Is it legal for a real estate agent to charge for a CMA?
A CMA may be charged by a real estate agent, but most will not, and homebuyers should consider it a free service. CMAs are often used by real estate agents to begin a connection with a prospective customer. Homeowners or buyers who desire a CMA can ask about a free CMA from a local real estate agent.
Final Thoughts
Agents may use a comparative market analysis (CMA) to evaluate the value of a prospective listing to other properties in the same market. This is accomplished by looking at listing prices, community characteristics, school zones, and other factors. CMAs should be used by all agents when developing a real estate marketing strategy, setting listing pricing, and negotiating transactions to guarantee an equitable sale.
