how to do a comparative market analysis
a cma involves much more than just comparing the prices of recently sold homes in the area here s a rundown of the basic steps for creating an accurate cma to set the right listing price or ensure a home you re interested in is a good deal the cma should consider the neighborhood s general quality for example it should consider the more attractive blocks and address community amenities nuisances and hoa rules equally important for inclusion are school proximity and curb appeal if a real estate agent or broker does the cma they will review the existing listing if there is one and make an in person visit to gather information about the home they ll take note of the home s size particularly the liveable space age style construction condition layout finishes landscaping upgrades and updates find three to five comparable homes in the area that have sold recently as close to the home as possible ideally the comps will be within one mile of the property and in the same school district focus on similar houses in terms of square footage lot size bedrooms bathrooms and type of construction pay close attention to when the comparable property sold the more recent the better real estate prices can fluctuate rapidly the comps should have the same placement if the home has a unique location such as overlooking a golf course or the waterfront the next step is to adjust for differences between the home and each comparable property an experienced real estate agent or broker can assign a price to each of the differences and adjust the price of each comp accordingly it may seem counter intuitive but if the comp has an inferior feature a positive adjustment is made to the price of the comp and vice versa for example if a comp has an extra bedroom a superior feature it is reasonable to assume that the buyer paid more to get the extra bedroom in this case you would deduct an amount from the comp to account for the extra bedroom thereby allowing an apples to apples comparison therefore the price of the target home is never adjusted after adjusting for differences divide the adjusted price of each comp by its square footage to determine the sold price per square foot next add the sold price per square foot of all the comps and divide by the number of comps to get the average finally multiply this average by the square feet of the property to estimate its price example of a comparative market analysismany real estate agents and brokers use software to generate comprehensive and professional looking cma reports if you plan to create your own use a spreadsheet to keep track of your research or try an online home price tool offered by one of the real estate listing websites below is an example of a cma report 