Ethical Homes

A CMA, variously expanded as “Comparable Market Analysis”, “Competitive Market Analysis”, and “Comparative Marketing Analysis”, is an informal estimate of a property’s market value based on recent sales of similar properties.

This is one of the tools that a real estate professional can use to help a homeowner determine a reasonable listing price for their property, and can also be used to assist home buyers in determining reasonable offer prices for properties.

The comparable properties (aka “comparables” or “comps”) used in a CMA should be as similar as possible to the property for which a value is trying to be determined (the “subject property”); since recent sales of truly identical properties can be hard to come by, an accurate CMA may need to adjust the effective sales price of the comps in order to reflect how those properties differ from the subject property in terms of things such as the number of bedrooms and baths, approximate square footage, size of major rooms, amenities such as fireplaces and pools, age of the home, and property taxes, in addition to adjusting for market differences based on the difference in time between when the comparables were sold and when the subject property is expected to go on the market or be sold.

Note that a CMA can only provide at best a rough estimate of the probable selling price of a property. Since eventual selling prices are determined by many other things besides the home itself, the results of a CMA should generally be given as a range of prices in which the property might sell; a range smaller than about 2% of the maximum estimated selling price (e.g. a CMA-derived price range of $500k-$505k, whose $5k “spread” is only 0.99% of $505k) should be considered suspect, as very few markets are homogenous enough to allow a CMA to determine prices more accurately than that.

Agents often provide CMAs to prospective sellers at no cost, with the expectation that the agent will be given the opportunity to list and sell the consumer’s home if and when the consumer decides to place it on the market. Note that while there is no obligation to list a property with an agent in return for their doing a CMA, it is generally inappropriate to not at least include that agent among the ones being considered and/or interviewed.

Similarly, even though many FSBO sellers masquerade as homeowners looking for an agent in order to obtain a CMA for their home, doing so is both highly inappropriate and counterproductive, since it inevitably leads to the FSBO being inundated with follow-up calls from perplexed agents, who at first don’t understand why the homeowner they were helping has suddenly stopped returning their calls, and who later often turn downright hostile. Instead, FSBO sellers should be up-front with agents about their plans; there are many agents who will gladly provide CMAs to FSBOs as well, in the expectation that at least some of those FSBOs will be unable to sell their property on their own and will eventually need the services of an agent.