What is a Comparative Market Analysis (CMA) in Real Estate?

A CMA is a detailed report compiled by real estate agents to evaluate the fair market value of a property by comparing it to similar properties, known as “comps,” that have recently sold in the area. 

So, how do you perform a CMA 

How Do Real Estate Agents Conduct a CMA?

Here are the four techniques that real estate agents use to conduct a competitive market analys in a specific area.

Analyze the Property and Neighborhood

The first step in a CMA is to gather detailed information about the property and its surroundings. 

This involves understanding the neighborhood, including its amenities like parks, shopping centers, and schools, as well as any potential drawbacks such as proximity to busy roads, airports, or noise pollution.

It’s also important to assess the property itself. Key factors include the home’s style (e.g., townhouse, ranch, two-story), square footage, number of bedrooms, and bathrooms, condition, construction materials, and any special features like a pool or a large backyard. 

Walking the neighborhood and speaking with the sellers or listing agents can provide additional insights that may not be immediately apparent from the listing alone.

Utilize MLS to Find Comparable Properties

The Multiple Listing Service (MLS) is an essential tool for finding accurate and up-to-date information on comparable sales in the area. The MLS database is continuously updated by real estate professionals, making it the most reliable source for recent sales data.

When searching for comps, set parameters that closely match the subject property, such as square footage, number of bedrooms and bathrooms, and specific features like a garage or a swimming pool. 

The goal is to find properties that are as similar as possible to the one you are evaluating to ensure the most accurate analysis.

Compare and Adjust the Value of the Properties

A quality CMA should include at least three to five comparable properties that have sold within the past three to six months. 

These properties should be analyzed based on their similarities to the subject property, considering factors such as location, size, condition, and any recent renovations.

Adjustments are often necessary to account for differences between the comps and the property being evaluated. 

For example, if a comp has an extra bedroom, you might add $3,000 to its sale price to reflect that difference. 

Conversely, if the comp has fewer bathrooms, you would subtract from its value. This process helps to ensure that the final CMA is as accurate as possible.

Setting the Listing Price

Once adjustments have been made, it’s time to set the listing price. The comps with the fewest differences and the most recent sale dates should be given the greatest weight in this decision.

To determine the average price per square foot, add together the adjusted prices of the comps and divide by their total square footage. 

Multiply this average by the square footage of the subject property to arrive at a base price. Finally, adjust for any current market conditions, such as a shortage or surplus of similar homes, which could affect pricing.

Key Factors Included in a CMA

When preparing a CMA, consider the following key factors to ensure a competitive and accurate analysis:

• Location: Ideally, comps should be within the same subdivision or within a half a mile of the subject property. If necessary, extend the search to similar neighborhoods within the same zip code or school district.
• Square Footage: Comps should be within 10% of the subject property’s size.
• Bedrooms and Bathrooms: Start with comps that have the same number of bedrooms and bathrooms as the subject property.
• Sold Date: Comps should have sold within the past three months, and no more than six months ago, to ensure relevance.
• Property Type and Condition: Consider whether the property is a townhouse, ranch, two-story, etc., and take into account its condition, including any renovations or necessary repairs.
• Lot Size and Special Features: Pay attention to the lot size, especially for rural properties, and any special features like a pool or a deck that could affect the value.

CMA vs. Appraisal: Understanding the Difference

While both a CMA and an appraisal aim to estimate a property’s value, they serve different purposes. A CMA is an agent’s estimate of fair market value, typically used to set a listing price before a contract is signed. 

An appraisal, on the other hand, is conducted by a licensed appraiser after a contract is signed and is often required by lenders.

Tools to Enhance Your CMA Process

Several software tools can streamline the CMA process, allowing you to quickly and accurately assess property values. Here are a few top picks:

• RPR (Realtors Property Resource): A powerful tool available exclusively to members of the National Association of REALTORS® (NAR), RPR provides detailed property data, including tax information, mortgage records, and transaction history, along with a robust CMA feature. This tool allows agents to create in-depth reports that combine MLS data with public records, providing a comprehensive view of the property’s market value.
• Cloud CMA: This web-based program integrates with most MLS systems and provides professional listing presentations, buyer tours, and property reports. It’s compatible with a wide range of devices, making it a versatile choice for agents on the go. Cloud CMA offers both print and digital formats for reports, and its user-friendly interface makes it easy to create detailed and visually appealing CMAs.
• ToolkitCMA: Known for its ease of use and comprehensive support, ToolkitCMA integrates with most MLS systems and offers a range of customizable templates for creating professional-looking reports. It includes features like interactive pricing adjustments, presentation tools, and the ability to create buyer tours and property flyers, making it a favorite among real estate professionals.

By mastering these tools and integrating them into your workflow, you can provide your clients with accurate, competitive analyses that lead to successful transactions. 

Whether you’re helping a client set a listing price or guiding a buyer in making an offer, these CMA tools are invaluable in today’s real estate market.

Final Thoughts on Conducting CMAs in Real Estate

Understanding how to conduct a Comparative Market Analysis (CMA) is crucial for real estate practice and plays a significant role in building a successful career as a new agent. CMAs are a fundamental part of real estate transactions, and mastering this process is essential for determining fair market value and setting the right listing price for your clients.

As a new agent, you might encounter many practical situations like CMAs. In our Rookie to Rockstar Career Course, we equip new agents with the practical skills and knowledge to excel in scenarios like these. You'll gain hands-on experience to confidently navigate real-world transactions and succeed in your real estate career from day one.