It is natural to think twice before buying or selling your property in real estate. You need to keep in mind many elements before putting a price on a property or agree on a price if you are a buyer. It will help if you consider some crucial factors before you go for it. This is when and why a Comparative Market Analysis comes into action.
What Is Comparative Market Analysis?
Comparative Market Analysis (CMA) is a detailed and complex process of estimating the value of a property using market analysis of comparable properties. In other words, real estate agents do a comparative study of properties. The properties must be sold within two to three months in the same locality of the property which is to be considered.
CMA is a crucial tool that requires knowledge of market analysis, competitor analysis, and industry analysis. Thus it is always preferable that you consult a licensed real estate agent to get a deserving price.
Six Easy Steps To Prepare Your Own CMA
To be a Comparative Market Analyst, you need to make sure that your report is accurate and timely. In that way, you meet the needs of the existing clients and get more listings and exposure.
So follow the below-stated steps very carefully:
- Comparative study: First, you need to analyze the pricing of every aspect that can affect the overall pricing of your property. Make a list of all such possible factors of properties that have been sold recently in the close neighbourhood. Some of the aspects that can bring a big difference to the value of your property are as follows:
- Location: The primary factor to consider is the location where the property is being sold. If the locality is in a metropolitan area, then it will surely raise the value. Similarly, if the locality is not much of a high standard, that can equally reduce the value.
- Lot Size: The property’s lot size plays a vital role in property valuation. Even half an acre of land can make a massive difference in the pricing. Thus, it is crucial to consider this point.
- Square Footage: The pricing of the house depends on how big the house is. The bigger the house, the more money is put on it and vice versa.
- Property Age: Property age is another crucial factor. The pricing decreases with the increase in the age of the property. The newer the property is, the more will be the pricing. If you have done any recent renovation or construction, that is considered, and it adds to the overall pricing. However, a new law has stated that historical buildings can have higher prices after appraisal.
- The number of bedrooms and bathrooms: If you have a higher number of bedrooms and bathrooms, that increases the rate of value of the property.
- Special features: If you have a fireplace, a swimming pool or a patio, or even a well-maintained basement, then these features will surely raise the value of the property.
- Date of sale: If the date of sale of other comparable properties is not recent, there can be a notable difference in the pricing of the property.
- Terms of financing: Terms of financing a buyer chooses can also affect the property price.
2. Gather Tax Information: To make sure your Comparative Market Analysis doesn’t miss out on any important aspect, do not forget to consider tax information. One of the main reasons behind it is that all property taxes are not sanctioned equally. In addition, municipalities impose different tax rates on different land properties. Thus, when you are preparing a report by comparing properties, make sure you have the tax information, and you know how it will affect the future homeowner’s expenses.
3. Gather Listing Data of your Comparative Properties: It is important to gather listing data of your Comparative Properties sold within two to three months. It gives you an idea of the cost of properties similar to your property.
Likewise, it would be best to collect the listing data of properties NOT sold in the recent past. It gives you an idea of the pricing that you should avoid in your comparative study.
4. Analyze the Comparative Properties Currently Up for Sale: In this step, you compare the pricing of your property with the properties that are currently up for sale. Compare every aspect listed above. This comparison will help you estimate the pricing of each factor that is responsible for affecting the overall value of the property.
5. Update the Micro-Trends: Once you compare apples to apples, it is now time to examine the MicroTrends in the locality. In other words, stay updated on what is going on in the neighbourhood of the property to be sold. For example, suppose there is road construction going on in the locality even though it is a metropolitan area; the construction can bring down the pricing of your property until it is completed.
Similarly, if, for example, a 24/7 security watch installation is done in the neighbourhood, it will surely raise the pricing of the property.
6. Put it all together for the Final Product: Now it is time to put together the pieces you have been collecting and bring them all together. You should know that your clients do not just need the numbers for their property. Show them your analysis and how you came up with the final range of values. Make sure you use graphs and charts to create your business plan. In other words, let your clients know your procedure.
Comparative Market Analysis is easy if understood thoroughly. If you can demonstrate your work, you can have a long list of clients waiting for you. The more you study, the more you know the depth and importance of this process. Putting a price on a property needs examination as your result shall justify the worth of the property.