Creating Effecting Comparative Market Analyses

Published December 17, 2018 by Real Estate Leads

Two of the most common services realtors provide for clients or prospective ones are market evaluations and comparative market analyses. The two are closely related to each other, and both are of great value to homeowners who want a genuine understanding of how their home measures up to others in the local market. This gives them a solid working understanding of what their home is worth in comparison to similar homes currently on the market, and they’re the better informed to make asking-price and other major decisions.

Here at Real Estate Leads, our online real estate lead generation system for Canada is a great way for realtors to get more out of their client prospecting efforts, but it’s only part of what’s required. Once you make a contact, it’s important to that you then convey your expertise with real estate and your explicit understanding of the current market dynamics for the area. Do that effectively and you’ll be in a position to be regarded highly by the homeowners.

Today’s communication, like many here, is primarily designed for realtors who are new to the business. The most important thing to understand for starters is that a CMA isn’t just comparative math. Rather, it requires a thorough knowledge of the dynamics of property sales in the specific area. With those you then make smart judgments based on the data presented. You’ll here people say ‘Real estate is local’, and it’s very true. It’s imperative to learn all about your local market.

Your understanding of the market needs to include why homes in one area sell differently and for higher or lower prices than comparable homes in another area. It’s not enough to simply compare numbers without knowing about the neighborhoods and properties in them. One of the most essential parts of putting a CMA together is which properties you choose as comparables.

The Right Comparable Properties

Here are the most important considerations for choosing those comparable properties:

  • Ones that statistically for sales are far above – or far below – the average price aren’t good indicator choices. Unless you don’t have sufficient ones to use, these ones shouldn’t be used.
  • Related to this, make sure you can justify your reasoning for discarding ones that don’t meet your reasonable-pricing criteria this way. If you decide a comparable is not appropriate, be prepared to explain your reasoning for it. Your client may ask you why you didn’t use a certain home. Be prepared to answer that question.
  • Comparable properties from the subject property’s area are ideal, and if not try to use ones as close possible. If you’re struggling to find comparables in the same neighborhood, try using some from a similar neighborhood in another region of the city or town.
  • Sold comparables shouldn’t be too old. Ones that have transacted recently are preferable. This isn’t a challenge in busy markets, but if you’re in a slow one or working in a more rural areas where fewer homes are in the inventory then it may be challenging. Going back more than two or three months will often mean you have to make some subjective adjustments for the long period. Even experienced realtors can struggle with this, so just do your best.
  • It’s also best to use similar construction builds when possible. Compare ranchers with ranchers, duplexes with duplexes, detached homes with acreage with the same, etc.

Adjusting Value for Property Differences

There are always differences, even with similar properties. You need to adjust your subject property’s value estimate based on important differences between it and comparable properties:

  • Difference in the lot or acreage size should be added or subtracted.
  • Same goes for feature differences like bedrooms, baths, garage, shade trees, etc.
  • Note financing differences that may have influenced sale price. Sometimes seller financing can result in a higher price paid for a property that isn’t a solid reflection of its true value. Keep in mind that these need to be ‘arm’s length’ standard transactions. Special situations with family sales, distress sales, etc. shouldn’t be part of your comparables.


Competitive Market & Current Analysis

Providing a full and detailed report to your listing prospect/client must also include a similar market analysis of the properties currently listed and in competition with their home. The clients’ list price recommendation can be shifted up or down depending on how many homes are listed in the area at the time, and the asking prices attached to them.

If you have an understanding that some of the highest sold comps were moved during periods with very low inventory, that could make it so that your clients amend their list price downwards if the current market features a higher inventory. The opposite then can also be true; if there are fewer homes available then they may be justified in bumping up their asking price.

Make your CMA Clear and Concise

You will be providing this to your client in printed form, so it’s important that information is clearly laid out on it. There are software solutions for almost any MLS system that produce very polished looking reports for comparative market analyses, and we highly recommend you purchase one and make good use of it. The value is in the data and your interpretation of it, not how ‘nice’ it looks.

Sign up with Real Estate Leads here and receive a monthly quota of qualified, online-generated leads delivered to you exclusively and for your similarly-exclusively served region of any city or town in Canada. It’s a proven-effective way to get much more out of your prospecting efforts and garner greater numbers of buyer and / or seller leads and give you the opportunity to showcase your abilities as a first-rate realtors