Comparative Market Analysis (CMA)
Your home has many values: one established by the municipal tax assessor, another established by the real estate appraiser, and a third established by you. It also has a value determined by prospective buyers depending on their needs, wants, and financial capabilities. Ironically, the selling price of a property is not necessarily determined by any of these factors nor by any financial needs the Seller might have, what the Seller may have paid, the cost of rebuilding it today, what the neighbours feel it is worth, or what other agents might say if they’re bidding to get the business.
The selling price is determined by the marketplace.
The single greatest factor in attaining top market value for the sale of a property is that property’s initial asking price.
One of the most important things an agent will do is to recommend an initial listing price that will go a long way to creating the very best possible market for your property. Your salesperson will research the market and perform a Comparative Market Analysis or CMA. The CMA compares your house to similar properties that have recently sold and properties that are currently listed for sale. CMA’s consider elements such as location, pricing, features, lot size, and property condition. A comprehensive CMA and analysis of relevant sales often points to a market price suggestion for the subject property.
A good agent will probe and interpret the information that the computer simply spits out. There are a host of factors and events a good agent will consider when looking inside the numbers for the story they tell. How long did it take for this comparable property to sell? Were there any price reductions in order to facilitate the sale or did it sell under multiple offers? Did it sell after having been withdrawn from the market, repositioned, and reintroduced into the marketplace? Were there unique features in this house that the marketplace either rejects or pays handsomely for?
Agents should be trained to interpret the figures of comparable sales and conduct their own independent analysis of your home to gauge market forces and make clear pricing recommendations and explain them.
Factors considered by CMA’s
- Size and Lot
- Unique features
- Supply and Demand
- Interest Rates
- Seasonal Demand
- Price, Location, Features and Condition
- Market Activity
- Time on Market
- Price Changes, Expiries