How do I perform a comparative market analysis (CMA)?

by matteo.zboncak , in category: Real Estate Investing , 9 months ago

How do I perform a comparative market analysis (CMA)?

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1 answer


by sibyl , 9 months ago


Performing a comparative market analysis (CMA) involves analyzing and comparing the sale prices or values of similar properties in a specific market area. Here is a step-by-step guide to conducting a CMA:

  1. Define the target market: Determine the location or area for which you want to conduct the CMA. Make sure to focus on a specific geographic area or neighborhood rather than a larger region.
  2. Gather property information: Collect information about the properties you want to include in the analysis. This data can be obtained from various sources such as local real estate listings, public records, real estate agents, or online listing portals.
  3. Select comparable properties: Identify properties that are similar to the subject property in terms of size, location, features, condition, and age. Ideally, these comparable properties should have been recently sold within the past six months to accurately reflect the current market conditions.
  4. Analyze sold prices: Examine the sold prices of the selected comparable properties. Consider any variations in terms of square footage, number of bedrooms/bathrooms, upgrades, amenities, or lot size. Adjust the sold prices accordingly to ensure better accuracy and comparability.
  5. Calculate price per square foot: Divide the adjusted sold price by the square footage of each comparable property to determine the price per square foot. This will help you compare properties of different sizes and estimate the value of your subject property based on its size.
  6. Assess market trends: Analyze the market trends and conditions that may have affected the recent sales prices, such as inventory levels, time on market, buyer demand, interest rates, and any other pertinent factors. This will help you contextualize the data and better understand the current market dynamics.
  7. Adjust for differences: Make adjustments to the sold prices or price per square foot based on the differences between the subject property and the comparable properties. For example, if the subject property has one additional bedroom compared to a comp, you may add or subtract a certain value to account for this discrepancy.
  8. Determine the estimated value: Based on the information gathered and adjustments made, calculate the estimated value of the subject property. This value should reflect the anticipated market price if the property were to be listed for sale in the current market conditions.
  9. Prepare a comprehensive report: Create a report summarizing your CMA findings, including details of the comparable properties, adjusted sold prices, market conditions, adjustments made, and the estimated value of the subject property. Use visual aids like graphs or charts to present the data in a concise and easy-to-understand format.

Remember, while a CMA is a valuable tool, it is not an appraisal. If you need an accurate valuation for legal or financial purposes, consult with a licensed appraiser in your area.