7 Easy Steps to Crush your Comparative Market Analysis (CMA)

Chris Heller HeadshotChris Heller, Licensed Agent12/30/2022

Stock,Market,Analysis,,Business,Intelligence,,Profits,Presentation,,Double,Exposure,BusinessmanWhen it comes to assigning value to a piece of real estate, it is important to conduct a thorough and detailed comparative market analysis (CMA) supported by real data. There are many individuals and entities that rely on professionals to perform the analysis. For example, bankers and insurance companies want accurate valuations to help them make informed decisions about investments and risk. Real estate agents want a targeted market value analysis to inform the advice given to buyers and sellers. Finally, individuals want an accurate valuation so they know they are making a smart purchase.

CMA’s require research and the knowledge to weigh multiple factors using carefully selected comps. They must know how to assign value to intangibles such as hand-crafted stair rails and how to depreciate the value of past renovations. Choosing the right properties for comparison can make the difference between a valid and invalid value assessment.

Now, let’s look at the seven steps you must take to complete a Comparative Market Analysis.

How to Create a CMA
shopping cartStep 1: Collect Data About the Property
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icone-de-la-maison-noireStep 2: Collect the Property's Previous Listing Data
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pen and paper iconStep 3: Gather Relevant Comps on Recently Sold Properties
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checklist iconStep 4: Gather Relevant Comps for Active Listings
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search iconStep 5: Evaluate the Macro Market Trends
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gearsStep 6: Understand the Market at the Micro Level
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emailStep 7: Present it to Your Clients
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Step 1: Collect all Publicly Available Information on the Property

The listing documents for the property will often include much of the information needed for your CMA, but there are other ways to locate the information you need. First, check with the local town or city hall to see records pertaining to the property, such as the current tax rate and a history of permits for improvements. This last piece is especially important since an improvement without the necessary permits may be considered temporary and should not be included in your assessment of value.

When assessing a home’s value, every single detail matters. You should learn everything you can about any renovations and features and be able to determine their relative age and condition.

bill gassett headshotStart with pulling the “field card” on the property that details all the pertinent data such as the square footage, bedroom and bath count, lot size, taxes, assessment, etc.

When you visit the home, it is essential to craft a detailed set of notes. Go room by room noting any details that really stand out. Focus on things that matter to buyers. For example, does the dining room have crown moldings and hardwood floors?

How is the kitchen? It’s the most important room in the home so you should know exactly what type of appliances the home has, the counter tops, floors, etc.

You should be doing this for every room in the house, so when you get back to your office to start creating the analysis, you have a mental picture of the property.

Understanding a properties strengths and weaknesses is vital to creating an accurate CMA.

The place where most agents go wrong is picking the appropriate “comps” and then making adjustments from property to property. Adjusting properly can make or break your CMA. (from Bill Gassett, Licensed agent for 35+ years)

This data, referred to as Subject Property Data, serves as the basis of your market comparison. With these details in hand, you can make an informed assessment of value using comparisons to the sale price of similar homes in the area that have recently sold and active listings.

Sometimes getting all the information you need is difficult. At the very least, you need to make sure you collect the following information to even begin the CMA process:

  • Year the property was built
  • Number of bedrooms
  • Number of bathrooms
  • Livable square footage
  • Acreage
  • Details about the location (Record city/state info and describe the neighborhood)
  • Amenities (garage, pool, greenhouse, etc.)
  • Assessment of interior finishes
  • Inventory of renovations with their year of completion and details about the work done
  • Previous year’s tax bill

Martin headshotStep one needs to be finding out everything you can about the property in question. This means inspecting the home, reviewing previous sale records, pulling the title report, and potentially even looking into known issues with this model of home or certain appliances. You should also consider types of finish, architectural details, and the condition of the rest of the property.

After that, you should look into comps, including both recent sales and active listings.

Getting beyond this is where you’re really going to make your money, because this is where you start analyzing trends. Offering a prediction on how the market is going to move for this particular home is a key part of a good CMA, and one of the biggest sources of uncertainty in them. (from Martin Orefice, Licensed agent for 12+ years)

Step 2: Go Back to the Future – Past vs. Present

Aerial,View,Of,Residential,Houses,At,Spring,(may).,American,Neighborhood,You also need to understand the history of ownership of the subject property. Then, as you review the property’s sale history, you can evaluate it in line with market trends. Has the value of this property followed or deviated from these trends? Has the property changed hands more than expected during the past decade?

Any deviations from the norm are worthy of further exploration and research. If the home’s value appears to follow market trends, you can use the historical price data as another way of predicting current value.

What if you find that the property has been previously listed and removed from the market unsold? This can also help inform your value assessment, as this data point indicates that market conditions could not support the list price during that time.

Jason_Ault-minMy number one tip to put together a comparative market analysis is to conduct interviews with previous property owners. It’s an important step to gather comprehensive information regarding any listed properties. That’s because the itsy bitsy details that can become the unique selling point of any real estate aren’t available in the tax records.

So, an interview can help you understand the specifics, making a home pitch much more appealing to the potential buyers. As a result, you can present a comprehensive and informative analysis to all your clients. (from Jason Ault, Licensed agent and consultant in Nebraska)

Step 3: Collect Relevant Comps for Recently Sold Properties

What makes for a good comp? A good comp is similar enough to your property in form or function to make relevant comparisons.

It would be best if you chose comps that:

  1. Sold within the past year (The past couple of years make a strong case for reducing that to six months if the local market has been especially active or volatile.)
  2. Are geographically close and similar in neighborhood type
  3. Performed well on the market, moving rapidly from listing to closing

Bill-Samuel Headshot
When narrowing down the comparable sales in the area, use the borders of the elementary schools and try to stick with properties inside these lines as values can change dramatically from school to school.

Try to avoid crossing over any major streets when selecting your comparable sales as well. After you have found properties in the same location, get to the short list of the best comparables to determine the value by selecting homes that are most like the subject property. One objective way of doing this is to find homes with the most similar features and therefore the fewest value adjustments needed. (from Bill Samuel, Licensed agent in Chicago)

Finding good comps can be complicated when your subject property has features that are unusual or hard to quantify. You may need to do some other research on the value of certain amenities if they aren’t represented in the comps you choose.

Choosing the right comps makes all the difference. The wrong comps can artificially increase or decrease the perception of value, yielding an inaccurate assessment of value.

For our CMA’s, I need full access to two separate real estate boards. We work in an area where not all agents do this, so this is how we make sure not to miss any comparable sales.

The first step is to get an accurate representation of the subject property. If we haven’t met in person yet, I’ll call and ask the seller what upgrades or updates they’ve done to the property (inside and out) since they moved in. Because I have the sales history through the real estate boards and government data (some sales are still private/off-market), I’ll mention how many years they’ve owned the home.

I’ll also confirm whether they still have the same number of bedrooms and bathrooms. Then, if they haven’t already mentioned it, I’ll ask specific questions about the age of the roof, furnace/air conditioning unit, windows & doors, etc. With this information, I will find similar-style homes (ex. 2-storey or townhome) that have sold recently with similar features – especially the number of bedrooms and approximate square footage.

I’ll print and bring this information with me to meet the sellers in person.The CMA helps provide a range and we discuss together how the sellers’ property compares with the comparables. We then identify an expected sale price, followed by discussions on pricing & marketing strategies to get us to that price. (from Paul Lisanti, Licensed agent)

Step 4: Collect Relevant Comps for Active Listings

Real,Estate,Broker,Residential,House,Sale,Listing,Contract,Paperwork,AndYou must also become familiar with the current market. Active listings are an important source of market value research, as they provide a window into how other local real estate professionals are operating under the current market conditions. The best ones, of course, are the ones that are currently under contract since those listings demonstrate how the market is currently behaving and what today’s buyers are looking for.

Local real estate agents can be a great resource for gathering this type of information. These professionals are experts when it comes to their market – you’d be surprised what you can learn from them.

Step 5: Understand the Market at the Macro Level

There is a lot to know about the external forces influencing market values at the macro level. Since 2020, for example, real estate markets have been hotter than ever, with millions of people on the move and a historically-limited inventory. Interest rates dropped, and the market was flooded with cash-rich buyers.

To accurately assess the value, you have to understand the role of these external forces in market value. Then, you can take your initial valuation and adjust up or down based on the value the market will support.

erik nilson headshot

Once the price modifications have been taken into account, divide the adjusted price by the square footage of each comparable. Then, add the costs together and divide by the number of comps to find their average

Finally, multiply the subject property’s square footage by the average price per square foot of comparable properties to determine its estimated fair market value. Depending on how close the comps are and other real estate market factors, you may need to change this pricing. (from Erik Wright, Licensed agent)

Step 6: Understand the Market at the Micro Level

At the micro-level, understanding what’s happening locally is also important. For example, you should get to know the neighborhood’s character and seek out information about planned construction projects or recent events that could impact the value of the subject property. Some projects, such as the construction of a highway off-ramp nearby or the erection of some high-speed communication towers marring the view.

robin antillMy number one tip for creating a comparative market analysis for clients is to evaluate the micro-market trends of the property. This means that you need to thoroughly understand what’s happening in the area where your subject property is located.

So, things such as building construction, road development, and/or security services etc., are all important factors you need to assess. What’s more, is that you must know how these factors will affect real estate prices.

This allows you to draw critical comparisons between other markets and help clients make competitive offers. (from Robin Antill, Licensed agent)

Step 7: Put it All Together and Present it

View,Of,Modern,Residential,Houses,Neighborhood,Street,In,Bentonville,,NorthwestYou’ve done the research, and your valuation is beginning to take shape in your mind. Now it’s time to pull it all together, make our assessment, and share it with the relevant parties.

Your CMA will be like a puzzle, and you must put the pieces together correctly to get an accurate result. There are qualitative aspects of your analysis like the home’s condition or quality of construction and quantitative elements like value per square foot or acre.

So, let’s see how our analysis comes together.

Start with your subject property’s history. Evaluate the listing and sales history of your subject property. Remember that you will be using previous assessments of value based on historical market conditions. Tracking the percentage of value increase in the market with the property’s sales history will help you develop one of the numbers you will use to build your value range.

Next, we will look at comparative properties in the area that have recently sold. Some markets are so active with such wide fluctuations in value that you should consider limiting the selected comps to those sold in the past six months. Otherwise, the comps you choose should be sales from within the past year. This number will be added to your range as well.

drone image of neighborhoodNow, look at the current market to see what’s out there. The best active listings to use for a CMA are ones that are currently under contract but not yet closed. These listings serve as a real-time indicator of market activity and buyer behavior and preferences. This is the third value in your range.

Active listings not currently under contract can yield important insights as well. For example, how long have these properties been on the market? Stale listings are often listed at a price that cannot be supported in the current market, a mistake that you also want to avoid in your CMA.

With all these pieces in mind, you want to create an initial range that reflects your early assessment for value based on sale history, recent sales, and active listing data. Then, make a note of these values from lowest to highest.

Now you have just two more considerations. Using what you have learned about which micro and macro market trends are relevant to the valuation of your subject property, you can begin with a value at the middle of your range and adjust up or down accordingly.

Templates for presenting these results are available via the MLS and other sources. As you present your findings, remember to include with your report all the relevant data used to support your assessment, providing a detailed explanation that describes how you reached your conclusions. In addition, include any photographs or documents collected and provide additional resources as needed regarding micro and macro trends that further influenced the findings of your CMA.

trey langford headshot

Agents don’t make the market, they interpret it but getting a CMA wrong has negative consequences for the seller, buyers, and other agents. There are many ways to interpret data, so collaboration is very important if reviewing active, pendings and solds does not create a clear valuation.

Reviewing your CMA with other agents may lead to finding an off-market property or connecting to another expert for an area or unique type of property. Real estate is an industry where we are always learning. Getting a valuation right the first time is critical for our clients so it sells quickly and for the highest price. (from Trey Langford, Licensed agent for 17+ years)

Comparative Market Analysis FAQs

Hand,Of,Business,People,Calculating,Interest,,Taxes,And,Profits,ToEven though you’re now an expert in how to successfully knock out a comparative market analysis, we know you might still have some questions. Here are some of the most frequently asked questions (and helpful answers from real estate agents) we get asked about comparative market analyses.

How many comps should I use in my next comparative market analysis?

The more comps you use, the better. However, it is important to note that they MUST be accurate to serve any purpose at all.

There is often a temptation to use a bunch of comps when doing a CMA, but in doing so, it’s easy to include a property that isn’t quite similar enough to your subject property which can lead to confusion. Remember, making apples-to-apples comparisons is the ultimate key to the entire CMA process. Don’t just start throwing oranges in there to impress your client with a full bag.

**Note: A good number of comps is usually between 3-5 for sold properties and the same for currently listed properties.

What’s the difference between a comparative market analysis and an appraisal?

Cropped,Image,Of,Businessman,Calculating,Energy,Efficiency,Rate,In,OfficeThere are subtle but important differences between an appraisal and a CMA. An appraisal is performed by a licensed appraiser, usually to break down the current valuation of a property for insurance purposes. A comparative market analysis is performed by a real estate agent or broker for the purpose of determining a list or selling price based on comparable sales and market trends in the area. While similar, there are different processes that take place, and they serve different purposes.

Where should I get my comps data for my comparable market analysis?

Financial,Team,Analyze,Data,In,Report,And,Consult,For,AssessmentWhenever possible, you should get your data from your local MLS. Even though Zillow and/or Trulia is a great place for consumers to get data on property, your MLS is going to have much more detail on each listing. You’ll also be able to get in contact with other professionals who have shown the house previously.

Also, third-party sites often don’t provide a history of a property’s price changes and total days on market. You’ll want to consider both items when finding comps for your comparative market analysis. Remember, you’re going for apples-to-apples comparisons here.

What’s the most important value trait I should consider in my next comparative market analysis?

Location plays the biggest role in determining the value of a property. A property’s location determines how far it is from desirable schools, hospitals, and restaurants. It also determines the home’s property taxes. When looking for comparable properties to use in a CMA, finding ones with equivalent locations is a must. Start by looking in similar neighborhoods, school districts, etc.

Chris Heller Headshot

About the Author

Chris Heller brings 27 years of experience in real estate. Chris serves on the AgentAdvice Editorial Board and is the Chief Real Estate Officer at OJO Labs. Chris brings deep expertise having held influential industry positions including CEO of mellohome and former CEO of Keller Williams Realty International.

Last Updated: 12/30/2022

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