Comparative Market Analysis in Real Estate When working with sellers to determine a listing price or with buyers to check value before offers to purchase, real estate agents do what is known as a comparative market analysis, or CMA. By going to sold property records, the real estate professional selects recently sold properties that are similar to the subject property and in the same area. By comparing these properties, and adjusting for feature differences, an estimate of value is made for the subject property. A thorough CMA would also include comparison to currently listed similar properties in the area. This would allow an assessment of the current competition and might lead to an increase or decrease in the estimate based on the sold properties. For example, a couple might be considering writing an offer on a four-bedroom, three-bathroom, 2,100-
square-foot, single-family home on a quarter acre of land. The house is listed for sale at $300,000. The coupleâ€™s real estate agent performs a comparative market analysis and locates three similar properties that recently sold in the same subdivision. The first is identical in every way to the subject property except that it is located on a busy road; it recently sold for $275,000. The second has four bedrooms, three bathrooms, and is located on a quarter acre of land but is 2,400 square feet because it also includes a screened-in porch; it sold for $315,000. The third has four bedrooms, is located on a quarter acre of land and is 2,100 square feet, but it only has two bathrooms, both of which are outdated; it sold for $265,000. Based on the differences in the properties examined in the comparative market analysis, the real estate agent determines that $300,000 is a fair listing price. Her clients decide to offer $290,000 in the hope of negotiating with the sellers to purchase the property at $295,000. A comparable market analysis can also include currently listed properties, especially if no similar properties were recently sold. However, listing prices only indicate what the seller hopes to get for the property and do not necessarily reflect what it is actually worth. Source: Investopedia
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