Completing a CMA
In a comparative market analysis, realtors want to determine the right price to set when selling a home. Also known as, a CMA or sales market analysis, the real estate agent first determines all the amenities of a home including square footage, acreage, fireplaces, number of bedrooms and bathrooms, and other features such as whether the home has a pool or fencing.
Cost per square foot is also a major factor when completing a CMA. How is price per square foot determined? Because realtors have access to multiple service listings (MLS) showing other homes for sale, they can utilize online tools via the MLS to obtain selling prices and square footage to determine the cost per square foot.
For example, for a home that has 1,500 square feet and recently sold for $150,000, the calculation would be:
$150,000 (sales price) divided by number of square feet (1,500) equals $100 per square foot.
Once the realtor determines the target home or home they want to sell, a CMA usually compares the target home to three other similar homes in the same area. Here’s where things can get tricky especially if the target home is not part of a master plan development but instead, in a rural area where there many homes that are different in size, shape and amenities.
Shown in the screenshot to the below is what some realtors and appraisers use to complete a CMA manually. It’s called a Uniform Residential Appraisal Report (URAR), which can be found and downloaded from Fannie Mae’s website (link in reference section).
The next screenshot shows the CMA page of the URAR where you can see the subject (or target home) and a place for three comparable homes. A URAR is often the best method for a CMA when homes are very different or in rural areas.
When using a URAR, all the features of the subject home are listed and comparable homes are found. Pay attention to the “adjustment” sections. Here is where the CMA really starts to take shape. For example, if the subject home had one fireplace and one of the comparable homes had two fireplaces, a positive (dollar value) adjustment would be made to the comparable.
On the other hand, if the target home had two fireplaces and the comparable did not, a negative adjustment is made. These adjustments help when homes have many different features but lie in the same area. Once the adjustments are made, the target home can be compared in a market analysis with homes in the same area.
In the Bright Hub Media Gallery, I’ve included a sample CMA URAR showing a real example of a subject home and three comparable homes with adjustments. This form will give you an idea of how to complete a manual CMA. The form is for informational purposes only and is owned by the author.
Some realtors pay fees to MLS and other online marketing services to help them complete a CMA, but if you’re thinking about getting into the residential real estate world, can you complete a CMA without buying access to the services that realtors have?
Free Online CMA Resource
One online real estate company, Redfin, offers free advice on completing a comparative marketing analysis for realtors and the public alike. You can find the link to this Redfin tool in the references section below.
Redfin has a large database of homes for sale in many areas. Before using the tool, Redfin suggests you:
- Define the criteria for comparable homes.
- Search on Redfin for recently sold homes.
- Drive by the comparable homes you select.
- Review the summary statistic spreadsheet the Redfin CMA tool offers.
- Set a price for the home.
As an example, I decided to utilize the tool.
First, enter a zip code for the area in which you want find comparable homes at the bottom of the Redfin CMA web page. I inserted 78744, which is one of the zip codes in the Austin Texas area. In the screenshot below, the Redfin tool will find homes in the area:
In the next screenshot, you can see how the CMA Redfin tool found many homes in our target area. Here you can sort the spreadsheet by number of bedrooms and bathrooms and even square footage to find homes you want to compare. Find the homes you want to compare follow the directions for creating your own spreadsheet, which is shown in the second screenshot.
Once you’ve followed Redfin’s five-step plan, it’s easy to learn how to complete a comparative market analysis for realtors and those new to the real estate world.
For realtors who are paid subscribers to MLS, online services such as Real Pricing Now (link in reference section) offers tools to complete a CMA easily; however, the service does require paying for a monthly, semi-annual, or annual plan.
Every realtor or those considering the real estate business needs to learn how to complete a CMA especially because most sellers and buyers don’t have access to the MLS. Setting the right price for a home before it sells ensures a better chance the home will sell if a CMA is completed properly.
Redfin CMA webpage - https://www.redfin.com/home-buying-guide/cma.
Real Price Now “How it Works” - https://realpricenow.com/how_it_works.aspx
Real Price Now – Pricing Plans - https://www.realpricenow.com/register.aspx
Screenshots of Fannie Mae URAR by author via https://www.efanniemae.com/
Screenshots of Redfin CMA tool by author via Redfin