When you interview real estate agents to choose which one to list your home, each of them may each give you a snapshot of the local market known as the competitive or comparative market analysis or CMA. The first thing you notice is that the CMAs are all different and that the suggested listing prices can vary by thousands of dollars.
Is it that the real estate professionals don’t know what they’re doing? Not necessarily, but a few may be dumb like foxes. Some agents will cast a deliberately wide net in a CMA to get you to list at a lower price so the home will sell quickly. They could also use large parameters if they’re unfamiliar with the neighborhood you want to help them get your listing. What you want are homes within a few streets of yours, not the whole zip code.
CMAs are generated from multiple listing service software. They are only as accurate as the search criteria. If an agent puts in an entire zip code, the results are going to be quite different from a two-block radius. So take a good look at the area parameters.
Market conditions are what CMAs report. They’re composed of property listings, sales and pending home sales for the purpose of helping buyers and sellers understand the marketplace better.
Buyers use CMAs to help them make the lowest offers possible and still get the homes they want. Sellers use CMAs to help them choose a listing price so their homes will sell quickly and for the highest dollar possible. They use comparisons that are supposed to be based on the most similar homes available, using size, age, features, amenities, condition and location.
Even so, the selected properties can vary greatly depending on the search parameters used by the real estate professional. These can include the type of home (detached vs. attached), the name of the street, number of bedrooms, baths and living areas, square footage, and numerous other fields of information. The CMAs also tell you which homes have recently sold – six months, three months, one month, and which homes are currently on the market in the area and within the price range you’re interested in.
As many fields of information as there are, some criteria simply can’t be listed in a CMA. If the MLS has a field for “ocean views,” you’ll know. But if not, you’ll have to learn more in the remarks section that is filled in by the listing agent or simply sort through the listing videos and photos.
CMAs results may vary even between identical homes. One property may simply offer better drive-up appeal or is in better condition than the other, and that will be reflected in the sales price.
Sellers should know that there is one major thing that can’t be quantified – buyer and seller motivation. You don’t know why a seller agreed to take less for their home or why a buyer overpaid for another home. Family problems, corporate relocations and other reasons all play a role.
What you can learn from the CMA is how long the home took to sell. If it was quick, the seller was highly motivated. If it didn’t, it was probably overpriced, in poor condition, or in a bad location.
Your real estate professional will suggest a pricing strategy for you based on the CMA, but the asking price will be up to you.