Perhaps everyone should first know is what a CMA is not. It is NOT an appraisal. It is a Comparative Market Analysis, sometimes referred to as a Competitive Market Analysis, performed by an experienced Real Estate Professional, to determine a range of value for a Real Estate Subject Property.
Generally at least 3 comparative sales of properties are used with which to compare the subject property, to ascertain a likely price range for the subject property. Adjustments are made to the comparable sales to reflect differences in value between the comparable sales and the subject property.
Comparable sales should be similar to the subject property and should always be actual sales and not listed properties that haven’t sold. If possible, comparable sales should be in the general area of the subject property. The neighborhood may need to be expanded if no comparable sales can be found in the subject property neighborhood but values in the expanded neighborhood should line up with Subject Property Neighborhood Values.
Example of a adjustments is as follows:
If the subject property has a fireplace and the comparable sale does not have a fireplace, then the value of a fireplace should be added to the comparable sale giving a “Indicated value of the subject property.” That would indicate the price the comparable property should have brought if it had a fireplace.
Likewise other adjustments for differences should be made to the comparable sales. If a comparable property has features that are “better than” the subject property, the adjustment is always a minus. If the comparable property has features or lacks features that are “less than” the subject property, the adjustment is always a plus. The adjustment(s) should always be made to the comparable property and not to the subject property.
Professionals performing a CMA should have a knowledge of the value of component parts of Real Estate so the value of the adjustment(s) will be correct. Also a knowledge of land values. Other areas of adjustments could include style, location, age, quality of construction, date of sale of the comparable, etc.. Generally, sales within one year are acceptable to be used in a CMA.
More or less weight may be given to each comparable sale depending on it’s similarity or lack of similarity to the subject property. The less adjustments made usually give the best indication of value.
A CMA is not an exact science. It merely gives a probable value of a subject property based on what other similar properties have sold for, with adjustments made for differences.
Real Estate Brokers and Salespersons normally do not charge for doing a CMA. They perform a CMA in hopes of obtaining a listing. It is important to both the Owner and to the Real Estate Professional to ascertain a probable sale price before marketing a property.
Again, a CMA is not a Appraisal. Appraisals may only be performed by State Licensed Appraisers.
A CMA is no better than the Professional performing the CMA. A CMA should be backed up by proper paperwork showing comparable sales used, adjustments and the INDICATED VALUE.