Before listing your home with a real estate agent or putting it on the market yourself, smart home sellers know it’s important to run a comparative market analysis (CMA). You may have received a flyer or direct mail postcard from a local real estate agent offering to provide this document to you that will tell you how much your home is worth.
Real estate experts prepare this report to more accurately determine the listing price of a home by comparing it to homes in the same neighborhood that have sold recently.
What a CMA Analyzes
Typical CMA reports look at active, pending, sold and inactive listings to get the most accurate information. Active listings are a home seller’s competition, although they aren’t necessarily indicative of market value as sellers can list their home at the price they’re hoping to get, but it doesn’t mean that price is realistic. For example, while the agent or seller can look at the condos for sale in Jacksonville, FL within a particular community area to get an idea of what other’s believe a good asking price is, they don’t reflect the true market value until they’re actually sold. In a buyer’s market, most sell for less, while the opposite is true in a seller’s market.
Pending sales don’t reflect the actual value either, until they’re closed; however, they do indicate the direction the market is moving. If your home is listed at a price above the pending sales in the area, that could mean that it will take longer for it to sell.
The best way to determine a listing price is to look at homes closed with the past three months, which is also what an appraiser will look at when appraising the home for a buyer. These sales reveal the true market value.
Inactive sales refer to homes that were taken off the market, which can happen for all sorts of reasons, but typically it’s because they were priced to high. The median prices for these off-market homes are nearly always higher than the median prices of comparably sold homes. Of course, in some cases they were taken off the market for other reasons, such as buyers requesting repairs that the seller was unable to complete, or the seller simply decided they couldn’t part with their home, experiencing seller’s remorse. Many sellers who’ve never sold a home before, 61 percent according to newsok.com, aren’t aware that there are many expenses associated with selling their home like transfer or sales taxes and agent commissions. While the average runs over $13,000, in high-priced markets like San Jose, California, the average is nearly $75,000. Obviously, that could be another reason some of these listings become inactive.
Important Factors In Comparing Sold Homes
When running a CMA, it’s important to compare homes that resemble your home as closely as possible when it comes to condition, size, age, amenities and location. The larger the home, generally, the more it’s worth, which means comparing a home that is similarly sized in square feet, ideally not exceeding over a 10- to 20-percent variance. The age of the home, or when it was constructed, should be within a few years of comparable sold homes. If homes in your area have upgrades, but yours does not, the value will be deducted by the buyer’s appraiser, so that needs to be considered too.
Location is also a key factor, in fact it may weigh even more than some of the others – your home is likely to be worth more if it’s on a pretty, quiet street than it would be if it’s located on a busy thoroughfare. If it has a view, perhaps of a city skyline or a lake, it will be worth more than one that has an unattractive view, like a cement wall. Or, if it’s located near a power plant or close to railroad tracks where there will be a lot of noise, that will detract from its value.