One of the most common questions realtors get is, “how much is my house worth?”. Though this question is simple, the answer isn’t always so black-and-white.
When assessing the value of your house, an agent needs to take into account much more than just the property itself. So, to ensure your property is valued appropriately within the current market, your agent will conduct a Comparative Market Analysis, or CMA.
What is a CMA?
A Comparative Market Analysis will compare your home against other similar properties to find its value in the current market. CMAs take into account both recently sold and on-market properties, along with the property history, to assist agents in finding suitable comparables. They consider the location, size, condition and age of the property, as well as the style, construction, and overall condition.
Why do I need a CMA?
When choosing to list your home, pricing is likely at the forefront of your mind. You don’t want to price so low that you undersell yourself, but pricing too high could mean your property struggles to stand out in a competitive market. A CMA conducted by a professional real estate agent is the best way to price yourself appropriately. After all, who knows the property market better than your real estate agent?
What’s the difference between a CMA and an appraisal?
CMAs are different to appraisals because they are provided by real estate agents rather than banks. An appraisal is a legal value and is required to attain finance from a bank before purchasing a home. Only licenced appraisers can perform appraisals. A CMA is a guide to valuing your home within the property market.
Why should I engage a real estate agent for my CMA?
Since 2020, the Victorian real estate market has seen constant fluctuations. Though you may find some information about local property values on the internet, the information available can only help you find a rough gauge of your property’s worth. It’s worth engaging a real estate agent or broker for help, as they have the most current knowledge of the market. Real estate agents also have access to the multiple listing service, or MLS, which contains information not available to everybody on the internet.
So what will a CMA entail?
A CMA conducted by an experienced real estate agent will include features specific to your property and local market. To provide some understanding of the depth involved in a CMA, below is a rough guide of some things you could expect to see.
The CMA report provided by your real estate agent will include what’s known as “comparables”. These are other similar homes in the area that have recently sold or are currently on the market. Using recently sold comparables can provide an accurate guide to what your house will sell for in the current real estate climate. Usually, your agent will use a minimum of three comparables.
The details of the listings of comparables are essential to account for when conducting a CMA. The report will take into account the listing date and price of the comparable as well as the date of its sale and final selling price. Looking at the selling dates and prices can help you get an accurate gauge of the market and analyse the differences (if any).
A detailed description of the property is included in a CMA to provide context to the valuation. This way, the differences between the subject (your) property and the comparable property can be accurately assessed.
The property description might include things like:
- Property size & elevation
- Age & condition of the property
- Square footage of the house itself
- Construction & finishes
- Floor plan
- Yard size, layout & landscaping
- Number of bedrooms, bathrooms and living areas
- Heating and cooling
- Parking availability (i.e. single or double garage, single or double carport, driveway, on-street parking)
Your CMA will only take into account comparables in the same location as you. Local facilities, including schools, grocery stores, parks and shopping centres, will be reviewed when assessing your property.
Things like a neighbourhood evaluation and overall curb appeal are recorded in a CMA. If your home is in a unique location, for example overlooking the water, this will also be included.
Your real estate agent wants to make sure the comparables they use are as similar as possible to your property to get an accurate figure. Therefore, adjustments are made for key differences between your property and the comparable to keep the value accurate.
An experienced real estate agent will assign a dollar value to features to add to or subtract from the comp’s value.
For example, if your house has a pool, but the comparable does not, a value will be assigned to the pool that will then be added to the comparable’s value. Or, say the comparable has a fireplace where your property doesn’t. The value attributed to such fireplace will be subtracted from the comparable.
This is where it is important to have an experienced real estate agent conducting your CMA, as their industry knowledge will attribute accurate and appropriate values to differences.
Your real estate agent will also adjust the sold price per square foot of the comparable property.
Fair Market Value
Your CMA will include the Fair Market Value assigned to your property at the end of the valuation. After considering everything mentioned above, your agent will be able to make a reasonable analysis of your property worth in the current market.
A CMA is an extremely valuable resource when listing your property for sale. Having someone who knows the ins and outs of the real estate market, as well as the values attributed to different aspects of property, can help you to get the best price for your property.