Comparative Market Analysis 101: Comparable Listings and Sales
Conducting a Comparative Market Analysis (CMA) is the first step in determining the value and price of a home. It’s not as straightforward as it might seem. For example, two homes that sit side by side may seem like obvious comparables (or comps). If the interior of one has been recently updated and the other hasn’t been renovated in 30 years, their comps will be dramatically different.
In addition to analyzing comps, an experienced listing agent will consider additional critical factors to determine a fair market price for a home. Typically, an agent will:
- Identify homes in the area that have been listed and sold within the last three months which are:
- Within a ¼ to ½ mile radius of the home being priced
- Within a 10% variance in size (square footage) of the home being priced
- Similar in age (year built) of the home being priced
- Collect at least three valid comps based on the criteria above
- Compare final sale prices to the original list prices and note any price reductions
- Note any expired or withdrawn listings that were taken off the market and re-listed
After gathering this information, the agent will conduct a comprehensive analysis between the home in question and the comps, making pricing adjustments as needed. For example, if a home that’s being listed is in a better location or has more bedrooms than the comps, the price may go up accordingly.
While sellers look to comps for information on how to price their home, buyers can leverage comps to make sure they’re putting in a fair offer. Knowing what similar homes in the area were listed for, and what they ultimately sold for, is a great way to figure out a competitive offer price.
Overall Housing Market Analysis
After carefully researching comps, it’s important to analyze local market data and trends to assess market price direction and understand whether the market favors buyers, favors sellers, or is neutral. Here’s what these data points may mean to you:
- In a buyer’s market, prices are usually declining because there are more homes for sale than there are willing buyers. In a buyer’s market, homes should be priced slightly lower than the competition.
- In a seller’s market, prices are usually higher because there are more buyers than there are homes for sale. In a seller’s market, homes can be priced above comparable sales, sometimes upward of 10%.
- In a neutral market, prices are steady because there’s a balance between buyers and sellers. Homes in this market should be priced in line with comparables.
What is the value of my property?
While it may be one of the first things you’ll want to talk about, the final decision about where to price your home will ultimately become clearer after we’ve done the work to make it market-ready. Yes, the comparable sales figures for other homes in the area are a factor, but they might not be everything.
At Legacy Real Estate, we’ll look at all the variables, the location, the features, and the demand. We know your property is unique and we’ll work with you to set a price that:
- Considers the best features of your home, as well as realistic drawbacks
- Gauges recent sales of comparable properties in your neighborhood
- Analyzes and reflects the price range that will attract the most qualified buyers
- Establishes your property’s fair market value in relation to current conditions
It is important to price your property correctly as it comes to market. Overpricing can pose significant challenges. If a reduction is later required, it can send a negative signal to buyers, even if the home is everything they’re seeking. When the circumstances warrant, we may consider an off-market period to test pricing which allows us to go public with a price we know will drive maximum interest. To learn more about us and our philosophy towards real estate, click here.
If you have any additional questions about CMA’s don’t hesitate to reach out. If you would like us to conduct a CMA on your property, simply fill out the form below or reach out to us at [email protected]. We’d love to help!