A CMA can help you avoid the risk of making a six-figure mistake

Before you put your home up for sale or decide to purchase a house, it is critical to start with a Comparative Market Analysis (CMA). Without one, you are blindly shooting at a target. Days or weeks of home preparation may go to waste if you don’t estimate the price right.

To be clear, a CMA is more than “pulling comps”. It is a thorough look into a property. It compares the past and present conditions to predict the future.

A complete CMA is going to include:

  • A price range the home should sell for
  • Information on the current market
  • Similar homes that have recently sold and their price
  • Similar homes that are currently for sale
  • The assumptions that are being used
  • A logical explanation of how we use all the information to create the above price range

The CMA is a great tool to help you estimate the range a home may sell for. It takes into account previous sales of similar homes along with the current market. This gives you a much more accurate price range than using an automated tool like Zillow or other AVM.

It also gives you an idea of the competitive landscape. It is important to understand what other options are available to buyers.

Plus, it gives you a solid foundation to fall back on if the home you are pricing does not perform the way you expect it to.

Getting your CMA is as simple as contacting a real estate agent. Every good real estate agent will have a process of creating a CMA. A great agent not only has a process, but they are also always honing their pricing skills. Make sure you are working with an agent that has a proven history of pricing experience.

Below, there is an example CMA that you can look at.

Common CMA problems

While a CMA may seem simple to put together, the quality of the CMA will vary based on the experience of the person building it. There are entire courses built around getting the CMA correct.

There are some common mistakes made when building a CMA. They include using the wrong information, not making the right adjustments, and not correctly interpreting what the information is telling you.

The wrong info (that you think is correct)

Here are the different ways a CMA uses information incorrectly.

  • Using price per square foot as a basis for comparison
  • Using listing prices and not sold prices
  • Using sold prices that are not correct
  • Not factoring in buyer or seller compensation

Accurate information is available in the MLS.

In Idaho, this information is not very accurate on Zillow or other property websites (click here to read about what I mean). Idaho is a non-disclosure state. When a home sells, the buyer and seller do not need to release the sales information. But, real estate agents are required to enter this information in the MLS.

Making the wrong adjustments (or not making any at all)

Every home is different. Even homes that are similar to the house you are pricing need adjustments for the differences.

The easy adjustments are square footage and the number of bathrooms. With experience, practice and working with appraisers, these adjustments can be made with accuracy.

The more difficult adjustments are comparing different ages, different features, acreage, and locations. Sometimes you should make an adjustment. Sometimes you should throw out the comparable home and not use it.

Inexperience and lack of resources

If you have never built a CMA or have the resources to check your numbers, you are taking a major six-figure risk. Buying or selling a home is a big financial transaction. Is it worth the risk of not getting it right?

Having experience is what leads you to ask better questions about a home. Is this home better suited for large families or investors? Is the property in a unique zoning opportunity that could lead to more money? Would it cost less to tear the home down and rebuild it?

And, of course, when you ask these questions, do you have the resources to get the right answers? This is another way the great agents separate themselves from the good agents.

Where to find a professional CMA

At this point, you can see why an accurate CMA can be difficult to pull together. There is a lot of information to sort through, analyze and then determine if it is usable or not. The process is methodical and takes experience to get right.

The good news is that getting a CMA for a home is easy and will not cost you anything.

Real estate agents make this a part of their normal operation. If you are selling your home, interview two or three agents. Ask them to bring a CMA to their listing appointment. The interview process is free usually only takes about 30 minutes.

If you are buying a home, ask agents for a buyer’s consultation (also free). Then ask them about their process for building a CMA on a home you would want to buy.

To get more information on selling your home, click here.
To get more information on buying a home, click here.

Buying and selling a home always starts with a thorough CMA. It provides you with the foundation you need to make great decisions.

Click here to view an example CMA