A comparative market analysis (CMA) determines the market value of a property by comparing it to similar properties that have recently sold, as well as to those currently listed for sale. A CMA is a crucial tool for listing agents determining the right sale price for a property. It’s also a tool for buyer’s agents advising their clients to make competitive offers.
Conducting accurate, consistent CMAs isn’t easy, and most agents aren’t taught this skill in their prelicense real estate classes. In this article, we’ll walk through the entire process of creating bulletproof CMAs, and give you a free CMA presentation template to share your findings with clients.
Before We Get Started, Did You Know That CMAs Will Get You Listings?
There’s nothing that demonstrates your knowledge, expertise, and action better than an accurate, well-presented CMA.
However, good CMAs take a lot of time. Elevate’s CMA tool streamlines the process for you. Whether you’re targeting one specific property or creating CMAs for entire neighborhoods as part of a farming strategy, Elevate takes much of the work off your hands.
Read our review of Elevate, or click below to see for yourself the many Elevate CMA tools that can save you time and boost your business.
How to Do a Comparative Market Analysis in 7 Steps
Let’s dive into exactly what you need to write a comparative market analysis that is sure to impress any homeowner.
We’ve compiled this content in a downloadable PDF guide, including a handy one-page quick reference for your convenience.
1. Gather All the Data Available About the Subject Property
“Subject property” is CMA-speak for the property for which you’re determining the market value. Since the critical function of a CMA is comparison, we first need to learn everything about the subject property so we can find other comparable ones with which to compare it.
How We’ll Use Subject Property Data in a CMA
Using subject property data, we’ll compare the “subject property” (whose value we’re trying to estimate) against other, similar properties that have either recently been sold or are currently on the market.
Remember, if you want to determine a home’s value, much less sell it, you need to be an expert when it comes to every detail. The more you know about a property, the better you’ll be able to gauge its value relative to similar, recently sold homes, as well properties currently on the market—not to mention its value relative to overall market trends.
ACTION STEP: Gather all the information you can about your subject property.
At a minimum, you need the following data points:
- Location (street, neighborhood, municipality, county)
- Total square footage
- Number of bedrooms and bathrooms
- Acreage (if privately owned)
- Year built
- Renovations or major changes since the last time the home was sold
- Interior finishes of note
- Any extraordinary features (swimming pool, pole barn, and so forth)
- Current taxes paid / millage rate
Copy and paste the list above for your next CMA
DON’T FORGET: You can get a lot of this information from the MLS (from previous times your subject property has been listed), from tax records and county/township websites, and most importantly, from the owner of the property. The owner of the home will have intimate knowledge of specifics, so make sure to interview them thoroughly.
2. Gather Your Subject Property’s Previous Sale / Listing Data
The best indicator of what the market will bear for a particular property is the market itself. A subject property’s previous sale and listing history provides insight into what the market has (or hasn’t) supported for the property in the past. It also helps us start to estimate the home’s value relative to the movement of the entire market.
How We’ll Use a Subject Property’s Previous Sale / Listing Data in a CMA
Using our subject property’s previous sale data, we’ll estimate the first dimension of a home’s value based on the market’s overall movement since it last sold.
For example, say your subject property was last sold five years ago. The median home price for your subject property’s market niche was $200,000. Today, the median price for that same niche is $210,000. With an increase of 5%, we can surmise that our subject property’s value might follow the same trend.
ACTION STEP: Gather all the information you can about your subject property’s previous sales and listings.
At a minimum, you’ll need the following:
- Previous list price(s)
- Previous sold price(s)
- Property details
- Price adjustments
- Days on market
Copy and paste the list above for your next CMA
DON’T FORGET: UNSOLD property data! Knowing the circumstances under which your subject property was listed for sale (but not sold) is critical to a successful CMA. Just as a sale indicates that the market supports a particular value, an unsold property often indicates a market that won’t support a specific price.
3. Gather Recently Sold Comps
Second only to understanding your subject property, having relevant comparable sales (or “comps”) is the next most important step. Comps are properties with primary features that are identical or very similar to those of our subject property.
A solid comp is a property that has been:
- Sold in the last 12 months (or, in fast-moving markets, the last six months)
- Near to your subject property on the map
- Closed within a reasonable number of days on market and sale terms
How We’ll Use Recently Sold Comps in a CMA
Using recently sold comps, we’ll estimate the second dimension of our property’s value based on what the market has recently borne for equivalent (or similar) property.
Sometimes finding good comps is a challenge. In situations like this, you’ll need to find comps and make some value adjustments relative to the property you’re assessing.
Criteria like acreage, square footage, and new amenities with specific price tags (like a new roof or new appliances) are easy to adjust for, while subjective attributes (like architectural design and landscaping) are harder to adjust for.
If the subject property is truly one of a kind, finding and adjusting comps is really more of an art than a science. Valuation is a complex process that will involve multiple angles and a range of values depending on who the final buyer is. Start by creating buyer profiles for the property and develop an idea of what the property could be worth to each of them. Then factor in some of the intrinsic value data, and also layer in the various incentives (tax breaks, etc.).
ACTION STEP: Using your MLS, find four or five sold properties that match your subject property in terms of the critical criteria we identified back in step one, going back one year. Why only a year? We all know how fast the market changes. You want the most recent sales data you can find since you’re looking to determine what the market value of a home is today.
4. Gather Active Listing Comps
An active listing comp is just like a recently sold comp except that it is, as you may have guessed, currently on the market. Active listing comps are important to the CMA process because they give insight into what our subject property would likely see in terms of activity under current market conditions.
How We’ll Use Active Listing Comps in a CMA
Active listing comps give us the third and final dimension of our property’s value, based on the current market’s reaction to similar listings. We’ll also gauge the level of competition we’ll face should we enter the market at various price points.
ACTION STEP: Using your MLS, find four or five active properties that match your subject property in terms of the critical criteria we identified back in step one. Ideally, these properties haven’t been on the market longer than twice the median days on market for similar listings. The best active listing comps are ones that are currently under contract, but not yet sold.
DON’T FORGET: Reach out to the listing agent of every Active Listing Comp to get the insider scoop on their property. They may have information that will further give you insight into your property’s value. Also, if their property is under contract, they likely have buyers who are interested in a property just like your subject property. Get it sold before you list it!
5. Evaluate the Micro Market Trends of Your Subject Property
The term “micro market trends” sounds highfalutin, but it’s really just a fancy way of saying “keep in mind what’s happening in the neighborhood.”
Let’s say there’s major road construction down the block from your property. Despite an overall trend of the market improving in the neighborhood, this micro market trend may drive down the final number on your comparative market analysis.
Likewise, if your subject property is located in a building that recently instituted a 24-hour doorman service, that’s going to drive the price of the apartment slightly over the price of the market research you’ve done so far.
How We’ll Use Micro Market Trends in a CMA
Using this knowledge, we can adjust our overall value predictions up or down relative to our findings.
ACTION STEP: Collect answers to the following questions: “Is there anything happening in the immediate area of your subject property that would drive the price of the home up or down? If so, by how much?”
DON’T FORGET: We’ve collected all of this information in a handy reference guide that you can download.
6. Put the Pieces of Your Comparative Market Analysis Together Into a Final Product
Nice work—you’ve done all the research necessary to put together a fantastic CMA. You know all the details of your subject property, you understand the recent sales history of similar properties, you know what the market is currently offering in terms of comparables, and you know what might affect the sale price of your property locally.
So, how do we pull all this information together into a final result?
A. Start With Your Subject Property’s History
First, start with the sales history of your subject property. Median prices have risen (or fallen) a certain percentage since your property last sold. Based on this (taking into account any renovations or alterations that have been made to the subject property), what should the current value be? Multiply the last sold price by the overall market change. This number will be the first in your property value prediction range.
Here’s an example:
B. Move to Your Recently Sold Comps
Next, take a look at your comps for recently sold property. Based on what you’ve found, what does the value of these properties indicate about the value of your subject property? Add up all your comps’ sold prices and divide by the number of comps you have. This number will be the second in your property value prediction range.
Here’s an example:
C. Look at Your Active Listing Comps
Repeat the previous step, but use the comps you pulled from the active market. This number will be the third in your property value prediction range.
Here’s an example:
D. Arrange Your Predictions From Lowest to Highest
If you’ve been thorough and consistent in your market research, you should see a trend emerge with all three estimates being reasonably close to one another. Arrange these numbers from lowest to highest to get a conservative, moderate, and aggressive market value for your subject property.
E. Don’t Forget Your Micro Market Trends
Apply any micro market trends to your predictions. Adjust each estimate using the increases or decreases you predict based on these assumptions.
7. Package Your Results & Share With Your Clients
We get it. By now, you’ve likely got a desk covered in papers, a web browser with 20 tabs open, and a head full of data—but hallelujah, you have your results!
However, you can’t just hand your client a range of numbers. They need a presentation, they need context, and most of all, they need to understand how you got to the answer you’ve provided.
Much like your eighth-grade math teacher demanded, you’re going to need to show your work. That’s why The Close put together a handy CMA presentation template that, in just a few pages, will give your clients or prospects all the information they need to understand how you arrived at your CMA results and determined a price range.
Additional Tools
All-in-One
Elevate is an excellent tool for busy agents who want the whole process done for them. Plus Elevate includes plenty of other features, like a customer relationship manager (CRM). We also like Cloud CMA, which focuses on CMAs but also puts together listing presentations and home tours, and has a range of highly optimized templates for both print and digital.
Templates
CMAs are a lot of work, but they don’t have to be boring. Use our template, try out one from Elevate, Cloud CMA, design your own on Canva, or even find premade templates on Etsy (which often use Canva). Here are examples that are comprehensive, clear, elegant, and sure to wow.
Comparative Market Analysis FAQs
Even though you’re now an expert in all things CMA, we know you might still have questions. Here are some of the most frequently asked questions (and helpful answers) we get asked about comparative market analyses.
What’s the difference between a comparative market analysis and an appraisal?
There are subtle but important differences between a CMA and an appraisal. An appraisal is performed by a licensed appraiser, usually to understand the current value of a property for the purpose of lending or insurance. A comparative market analysis is performed by a real estate agent or broker for the purpose of determining a list or selling price based on comparable sales and market trends.
How many comparables should I use in my comparative market analysis?
The more comps, the better. Actually, I should temper that by saying, the more comps, the better—as long as they’re ACCURATE.
There is often a temptation to use a TON of comps when doing a CMA, but in doing so, it’s easy to include a property that isn’t quite similar enough to your subject property. Remember, making apples-to-apples comparisons is key to the CMA process, so don’t start throwing oranges in there just to impress your client with a full bag.
A good number of comps is between three and five for sold properties and the same for currently listed properties.
What’s the most important property trait I should consider in my comparative market analysis?
Location plays the most important role in determining the value of a property. A property’s location determines how far it is from schools, hospitals, and the beach. It also determines the home’s property taxes. When seeking comparable properties to use in a CMA, finding ones with equivalent locations is a must.
Where should I get my comps data for my comparable market analysis?
Whenever possible, you should get your data from your local MLS. Even though Zillow is a great place for consumers to get data on property (and a great place for you to pick up leads), your MLS is going to have much more detail on each listing.
Also, third-party sites often don’t provide a history of a property’s price changes and total days on market. You’ll want to consider both items when finding comps for your comparative market analysis.
The range of my three numbers is too wide. What do I do?
When your CMA range comes back too broad to be helpful, it’s usually an indicator of one of two things: Your comps aren’t similar enough to your subject property or you’re inaccurately estimating the growth (or contraction) of the market since your subject property’s last sale.
Go back and check both angles again to see if there are better comparables out there or if your estimation of the overall market movement could be refined and improved.
My results are different from my colleague’s results. What gives?
Remember, even though a comparative market analysis uses objective information like square footage, acreage, bedroom count, and the like, they’re ultimately a tool that relies on subjective feedback from you, the real estate professional.
For example, when you’re considering a comp that’s similar to your subject property in every way except that it has an extra bathroom, what value do you assign that bathroom in your adjustment? Your colleague may adjust it differently than you do, or perhaps, not even choose that comp in the first place.
If your conclusions are different from other real estate agents, don’t fret. The market will demonstrate who was closer to the actual value. Trust in your process, and if the market gives you constructive feedback about your final numbers, find where you need to make an adjustment in your CMA process to make your next CMA even better.
What if my property is vacant land?
Vacant land is tricky. You have to examine zoning options, highest and best use, utility availability, etc. Also, vacant land prices are closely tied to construction rates and demand. I would recommend talking to your broker for guidance on specific properties.
Bringing It All Together
Learning how to do a comparative market analysis isn’t easy, but now you have a thorough understanding of how to estimate the value of a property in your market. Take this information to make your sellers’ list prices more accurate and your buyers’ offers more competitive. Have any tips or specific questions? Leave them in the comments below!
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