No two homes are identical, which is why choosing a sales price or offer price for a home can be challenging. That’s where the comparable market analysis, or CMA, can be useful.
What is a CMA?
The CMA is a side-by-side comparison of homes for sale and homes that have recently sold in the same neighbourhood and price range. It gives you information (sometimes referred to as "comps") about houses similar to yours in sizes, amenities, and location. This information is further sorted by data fields such as single-family or condo, number of bedrooms, number of baths, postal codes, and many other factors. Its purpose is to show fair market value, based on what other buyers and sellers have determined through past sales, pending sales and homes recently put on the market. Homes that were listed but expired, most likely because they were priced too high, may also be used as comparables.
How is the CMA created?
At Hudson Real Estate, the process of creating CMAs for clients starts with a painstaking search and review of homes sold or currently listed in your area using the multiple listing service (or the MLS®). The MLS® is available to licensed members only, including brokers, salespeople, and appraisers, who pay dues to gain access to the service’s public and proprietary data, including tax roll information, sold transactions, and listings input by all cooperating MLS® members. Next, adjustments in value are often made, since finding perfect comparisons is not always possible. Lastly, we use sophisticated real estate software to generate reports that present the information and our recommendations clearly so clients can make decisions more confidently.
Listing agents generate CMAs for their sellers, and buyer’s agents create them for their buyers so both sides know what current market conditions are for the homes they’re interested in comparing.
How accurate are CMAs?
The CMA is a here-and-now snapshot of the market, based on the most recent data available, but it can instantly be rendered obsolete by a new listing, or a change of status in a home with the same criteria. Why? The market is constantly changing – new listings, pending sales, closed sales, price reductions, and expired listings. It's ideal to have your CMA look back no more than three months when the market is in transition, and no more than six months in a more stable market.
CMAs can vary widely, depending on the knowledge and skill of the person inputting the search parameters to the software as well as the number and type of data fields that are chosen. If you have questions about a CMA, don't be afraid to ask the REALTOR that created it to explain the criteria, adjustment values and other parameters they used to arrive at the price they are suggesting your home is worth.
Lastly, as informative as the CMA is, it should only be used as a tool and should not substitute for your real estate professional’s knowledge and advice.
