Comparable Market Analysis: What is a CMA and how does it determine your home’s value?

Posted by Matthew Lindsay on Friday, November 16th, 2018 at 3:30pm.

Comparable Market Analysis: What is a CMA and how does it determine your home’s 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 wasn’t sure what it meant. CMA stands for Comparable Market Analysis. This is how real estate agents determine the market value of your home before they get it on the market.

Real estate agents come up with these values through research of your home’s location, comparable properties and the market. Unlike most commercial properties, whose value is determined by income, residential properties take a different approach.

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 can not use recent sales to come up with better 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 to. They use that information to come up with a tax assessed value, and these values are split into land value and improved value (improved referring to the home itself).

When looking for a market value, there is one price that includes 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 a mile to one mile, and further out in more rural areas. Different neighborhoods, zip codes, and towns all have different values, so it important to keep the search as close to the subject property 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 they only sell at what the market allows. This is why we only use sold properties -- because we know the price they were purchased, which can be quite different from the list price.

Once recent sales are found, the agent begins to narrow the search by looking for homes with similar styles, builds, garage count, age and square footage. Once the list narrows with these search parameters, then 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 current market and knowing where it is trending do play apart in pricing, 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 matthew@precisionhomegroup.com.

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