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What Is CMA in Real Estate?

real estate agent sitting at a table with a laptop explaning the factors that go into a comparative market analysis

If you’re considering listing your home on the market, you might want to review a comparative market analysis (CMA). What is a CMA in real estate, though?

But first, let’s talk about the current real estate market and why you’d be wise to review a CMA. 

According to Fortune Builders, over the last 12 months, housing market prices have increased by 18.2%. Inventory levels for new homes are also low, which could mean a great chance to take advantage of the market. 

So what is a CMA, and why should you review one? 

What Does the CMA Real Estate Term Mean?

If you’re still asking yourself, “What is CMA in real estate?” the name says it all. This is a comparison report of the local real estate market. Some realtors might refer to these CMAs as simply “comps“. 

These CMA reports can vary not only because of the market and location of your home but also what market variables your realtor feels best indicate the property’s value. 

Your realtor isn’t the only individual who can utilize the data to create a comprehensive CMA. An appraiser will also generate a real estate report. 

Only a licensed appraiser can issue a real estate appraisal. It needs to be said that a CMA is not an appraisal, which will be surprising for some new sellers. 

But this said, creating a CMA is a complex operation that combines many elements. Including the real estate market trends. Which, as we mentioned, is heavily favored towards the sellers. 

Also, a CMA should reflect a fair, unbiased assessment of property, which will give everyone involved a good understanding of the asking price. 

Another note to make is that generating a CMA real estate report is not a necessary exercise. It is not required by the federal government and is done only for your information. 

But as the expression goes, those who don’t prepare, prepare to fail. 

So, why generate a CMA report if it’s not required by law?

Why Should You Prepare a CMA Report? 

If you are onboarding a realtor, you need to be on the same page about the pricing of the home. 

By simply going through the exercise of compiling a real estate CMA report with a realtor, you will also be able to tap into new insights into the market. 

They will be able to give your comparative market analysis tips and comparative market analysis guides. 

In some states, homeowners can hold realtors and their brokerages responsible for performing an uninformative CMA and mispresenting the facts. This means that your realtor needs to be your real estate CMA guide. 

If you are a homeowner that believes this has happened to you, you can file a complaint to the state’s real estate licensing commission. But you need them to compile a CMA. 

Homeowners who are successful and are found to be right can expect the guilty party to face disciplinary action. 

But, other factors that an adequately filed CMA report will reveal are:

  • Repairs that need to be made to the property
  • Estimations of timings
  • Highlight your property’s positive attributes
  • Professional opinion to back up the listing price

We’d strongly recommend getting an iValuation or home evaluation, even if you sell your home for cash and don’t need an appraisal. 

Let’s focus on what might be in a CMA report.

What Will Be In a Real Estate CMA?

A realtor’s first step is to research real estate trends in your area for the last three to six months. This comparative listings report will be taken from data of homes within a radius of a few blocks. 

For areas where it is difficult to tap into these statistics due to your home being very new or in a place where no one is selling (AKA: rural area), we’d suggest getting an appraiser in to do a more qualified assessment. 

But calling an appraiser will cost money, so if your agent can produce the document, allow them to use the tools at their access — namely, the Realtor’s Property Resource, a national home sales database. 

All these sales are listed on Multiple Listing Services (MLS), which will list those subscribed to the service who can access data about recently sold and bought properties. 

In some cases, agents might look up property tax records, as it is an excellent jumping-off point to set parameters for what the federal government has estimated the property’s value. 

However, these will usually be lower than the median price in the area. 

So, what are the other factors that change the CMA?

Location of Property

When it comes to marketing a property, the location matters. The CMA will take into account its proximity to schools and amenities. Another consideration is the neighborhood’s general condition, whether the sidewalks are clean. 

The property’s location gives the agent an idea of the lifestyle they are selling. A perfect lifestyle fit, or generalization, for younger and single individuals, is if your property is located in the center of town. 

A factor to also consider is if there is an active homeowner association (HOA). HOA can either add to the property’s attractiveness or, if they are restrictive, be a hurdle. 

Overall, location matters a lot when compiling a comprehensive CMA. 

Other Properties Details 

As mentioned, this is a comparative market analysis, which means that your realtor will need to compare listings of properties sold and bought within the last three to six months. 

In these listings, the realtor will be focusing on:

  • The asking price of the property
  • Size of the property
  • Age of building 
  • Styling
  • Construction of the home
  • Landscaping
  • And any mentions of updates and renovations

Once this information is gathered, the real estate agent will determine what criteria made a property attractive or not. 

Depending on where your home is located, trends can be different.

At the end of this process, the realtor will select three to five comparable homes in the area for the CMA. 

But how would they determine the best reflection of your home? 

Selecting Homes for the CMA

The agent will split the selection between recently bought and sold. These listings be the closest examples of the seller’s house.

While physical aspects will be listed, CMA will also highlight:

  • Distances to amenities
  • Schooling districts
  • And the time they were either bought or sold

The last point is arguably the most important, as the property can change overnight. So, if you are selling, you want to do it as quickly as possible

But for the seller whose market hasn’t fluctuated, it will give a good indication of what sales. 

Another factor when selecting homes for a CMA is their differences. 

These differences can be the difference between being able to ask for more or less. 

Also, some additions will add more value than others. More bedrooms is one of the main differentiators of price when comparing homes. In contrast, niche features such as a putting green will not drive up your potential asking price. 

Once they’re happy with their adjusted list, they need to work out how much properties in the area sold for and work out per price per foot. 

Working Out Per Square Foot

Once you’ve adjusted your asking price for the differences in the CMA, the agent needs to show you how much your home is worth per square foot. 

They’ll start by dividing the price other properties sold for compared to their square footage, giving you their sold square footage.

You will want to find the average of this estimate for your area, meaning all the listings in the CMA will be worked out. 

Your realtor will need to crunch all the numbers and tap into their insights to give you the asking price that’ll work for you. 

Getting That Asking Price Just Right

While the real estate market is extremely healthy, there are some concerns that the market might change soon. Which, according to Insider Business, we’ve skipped.  

There’s still a need to ensure your home’s listing price is just right. Too much, and you’ll be stuck with a property that doesn’t move. This will eventually mean potential buyers will submit lowball offers. 

And if you’ve undervalued the property, you might not get the cash you need to pay off your mortgage or get the profit you need for your future plans. 

We also need to mention that your realtor providing this service will need their commission. 

According to Redfin, the typical real estate commission is between 5%-6% of your home’s selling price. 

This means if your home is listed for $150,000, you owe your realtor $7,500. 

Suppose you’re worried about profit margins and can’t avoid selling your home with a real estate agent. Don’t be. 

You can recruit the exact client with cash in your area with iBuyer.

But how does iBuyer work? 

No Need To Worry About CMAs With iBuyer.com

iBuyer has changed up the home selling process. There’s no need to call in real estate agents, landscapers, repairmen, and appraisers, just hop onto our site and get a fair cash offer now

In 2022, we can access this information compiled in a CMA in seconds without human error. Allowing for computers to work out the CMA, you get real current market values in the palm of your hand. 

And some of our iBuyers will send an evaluator to double-check the computer’s calculations. 

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