What is a CMA and how does it determine your home value?
All too often, realtors use jargon that the average person isn't familiar with. The term “CMA” is one of those terms you may have heard, but weren’t entirely sure what it meant. CMA stands for Comparable Market Analysis. This term refers to how a real estate agent determines the market value of your home before listing it on the market.
Real estate agents come up with these values through the research of your home’s location, comparable properties in the area, and the current market trends. Unlike most commercial properties, whose value is determined by income, residential properties take a different approach.
Value: Tax Assessed versus Market
An important distinction is that there is a difference between “tax assessed value” and “market value.” Tax assessed value is what you pay taxes on and, depending on where you live, can be above or below market value.
Here in Alaska, we are a non-disclosure state. That means, when you sell your home, you are not required to disclose the sales price to the state. And, therefore, the tax assessor cannot use recent sales to come up with more accurate tax assessed values. The tax assessor looks at the street view of the home, tax records, number of bedrooms and bathrooms, and anything that they can put a number value to. They then use that information to come up with a tax assessed value. These values are split into the land value and the improved value (improved referring to the home itself).
How is Market Value Determined
When it comes to the market value of a home, there is one price that includes both the home and the land. The first thing that an agent is going to do to come up with your market value, is look for recent home sales in close proximity to yours. In Anchorage, we try to keep it within a half-mile to one mile radius, but may be further out in more rural areas to find similar properties. Different neighborhoods, zip codes, and towns all have different values, so it is important to keep the search as close to the subject property (the property which you are selling) as possible.
When looking at comparable homes, it is imperative that only sold homes are used. This is because anybody can list a home for any price. However, homes will only sell at what the market allows. (This is why we only use sold properties. We know and can confirm the price they were purchased for, which can be quite different from the initial list price).
Once recent sales are found, the agent begins to narrow the search by looking for homes with similar styles, builds, garage size, age and square footage. Once the list narrows with these search parameters, the price starts to become more apparent. Typically, there is a small price range at which the market will respond to the home. After identifying comparable properties, the adjustments to the price, based on upgrades and updates to the home, can be made.
This pricing approach takes time and experience to get great at. Things like the state of the current market, and knowing where it is trending, do play a part in pricing a property, and a great agent will be able to handle that. If you have any questions about your home’s worth, I would love to schedule a consultation with you. Send me an email at email@example.com or click the link below to get started.
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Precision Real Estate is based in Anchorage, and provides real estate services throughout Alaska. We will keep you informed on current trends and market dynamics to help you make the best informed decision. If you are interested in purchasing a home, get in touch with our experienced real estate agents! Our team of experts will negotiate great deals for your home and help you navigate the buying or selling process every step of the way. If you are looking to get into a property that makes sense, or need help analyzing a potential property, click the link below to get started.