CMAs, Explained: What they are and how they’re done

Whether you plan on selling your home or purchasing one, you’ll soon start noticing other homes in the neighborhood. If you’ve done this, you’ve already intuitively grasped the core idea of a CMA, otherwise known as a competitive market analysis. 

Put simply, a Comparative Market Analysis (CMA) is a quick overview of three to five comparable properties in terms of size, design, location, construction, and condition that are used to help gauge the value of your home. 

A CMA is a home valuation method based on comparisons of other properties; it’s not an appraisal of a home.  Rather, this analysis helps place your home, or a home you might buy, into the context of the market at large.

See-saw with a house on one end and stacks of coins the other.

Table of contents

Do I need a CMA? How to conduct a CMA1. Find comparable homes. 2. Note material differences 3. Adjust the price of each comp4. Calculate an offer/asking priceCMA vs. appraisal: What’s the difference?

Do I need a CMA?

Buyers and sellers typically benefit from CMAs. They can be used in the following scenarios: 

  • Home sellers are able to review comparable sales, and determine an appropriate list price for their home. 

  • A buyer can use CMA to fact check a home price based on comparable sales. In that sense a CMA can end up being a value negotiating tool.

  • A CMA can also be useful if you’re remodeling a home. A CMA allows a remodeler to see if the proposed changes will improve the home’s value significantly in context of other properties in the neighborhood. 

  • A seller might request a CMA as part of the interview process for potential real estate agents, and used as a way to compare real estate agents you might work with. 

The process may seem complicated, but recall that the CMA is just one more way to become an informed participant in the real estate market. It boils down to some background reading, and some simple math that can help place your property in context. 

How to conduct a CMA

Real estate agents create CMAs using data from the multiple listing service (MLS) or past tax records. The MLS is available only to real estate professionals, which is why it’s hard to conduct an accurate CMA on your own. Here’s a list of the basic steps your realtor will take to create a CMA.

1. Find comparable homes.

A real estate agent will begin a CMA by selecting several comparable homes to yours to include in the report (these are called “comps”). The comps will typically be similar homes that have sold in the last three to six months. A CMA will nearly always consist of sold properties, but if you’re in a very rural setting or in a slow market, this may be more challenging. In that case, a formal appraisal or expanding the comp criteria might be necessary.  

Here’s a list of things a real estate agent might consider when selecting comps: 

  • Location. Ideally, this would be within a half mile radius of your home (or, if you live in a suburban area, the same neighborhood subdivision). If that radius is extended, the other homes must resemble your property in many other ways. 

  • Square feet. A comp would have about 10 percent more or less square footage compared to your property. 

  • Property details: Remember, you want comps to be as similar as possible to the subject property. You can always adjust the price of these comps to be more similar, but you’ll want to try to select comps that have similar amenities to your subject property to streamline the process. Details you might look out for include: beds and baths, a floor plan, elevation, flooring details, garages, laundry facilities, or special features, like if the property has a pool, fireplace or finished basement. 

  • Listing age and condition: A newer home in good condition often has higher value, but a historic home with renovations may also be high value. 

  • Financing and sale terms: Importantly, a CMA should take the selling price of a similar home into account rather than the asking price. This ensures that overinflated values don’t skew the CMA. 

2. Note material differences

After collecting those details, a real estate agent will catalog the differences between your subject property (also called a target property) and the comps, and adjust the sale prices of the comps to account for those differences. 

For example, imagine that a comp has a fireplace and your property does not. The real estate agent will first determine the value of the fireplaces present at the comp. Let’s say that a fireplace is worth $1,000. Then, the realtor will subtract that $1,000 from the comp’s sale price, to make it more similar to yours, which has no fireplaces. 

The realtor might also add money to a comp’s price. For example, let’s say that your property is in good condition, while the comp is in poor condition. The realtor might add the estimated price of repairs to the comp’s price, again, to make it a better comparison to your subject property.

3. Adjust the price of each comp

The real estate agent will then add all those adjustments together for each comparable property, and calculate the adjusted price of each home. That adjusted price is an estimate of what those homes would have sold for if they were as similar as possible to the subject property. 

These adjusted prices for the comps should give a range of potential values that represent a fair asking price for the subject property.

Woman stands in a front of a graph that shows an increase.

4. Calculate an offer/asking price

Now, it’s time to arrive at an asking price or offer, depending on whether you’re a buyer or a seller. A real estate agent does this by placing a weight on each comp’s adjusted price and adding the total together. 

How does that process work? Remember, not all the comps will be equally good points of comparison. The more adjustments needed, the less weight the real estate agent will place on that home’s adjusted price. Once the weights are decided the real estate agent will multiply the value of each home by its respective weight and then add all three values together.

CMA vs. appraisal: What’s the difference?

The process of conducting a CMA might seem similar to a formal appraisal, but it differs in a few key ways. 

  • Format: A CMA doesn’t have to follow a formal report style (though they often do anyway), and doesn’t need to be done by a licensed appraiser. That said, CMAs are still done by real estate professionals, typically real estate agents. 

  • Pricing: CMA can occur earlier in the buying or selling process than a formal appraisal does. For instance, once a buyer makes an offer on a home, a bank may ask for a formal appraiser to evaluate the property. A CMA done by a real estate agent can happen earlier in the process, when the seller is still trying to gauge what price to set in the first place. 

  • Accuracy: There are some cases in which a CMA might not be perfectly accurate. For instance, if you live in a rapidly gentrifying area, other homes in the area may not actually be that comparable, even with adjustments. If you find that your CMA requires many adjustments, then it might be better to go for a formal appraisal. 

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