When selling a home, you have to be careful about the asking price you set. Setting the right price is one of the most important steps when selling a house. If you overprice your home, it’s likely going to sit on the market for a long time. So if you want to sell your property fast without compromising your sale price, you need to find the fair market value of your house. This is the most competitive price for your house which is likely to get you multiple offers. With competition created, you will even be able to sell at a higher price. Regardless of what we think our house should sell for, it’s the real estate market that determines what price buyers are willing to pay.
To come up with the right property value, the property seller needs to examine other similar houses and what they are selling for. The best way to compare your home with others on the market is to run a comparative market analysis (CMA). Before putting a house on the market or listing it with an agent, savvy property sellers perform a CMA to decide what price to set. It’s important for a property seller to learn how to do a comparative market analysis before listing their property for sale. But what is a comparative market analysis?
Comparative Market Analysis Definition
A comparative market analysis (or real estate market analysis) is the process of comparing one property with other similar properties in the same area so as to find the subject property’s market value. These properties are also referred to as real estate comparables or real estate comps. The real estate comps need to be as similar as possible to your property for the CMA to be accurate.
The following are some of the characteristics that should be similar when examining real estate comps:
- Amenities and upgrades
- Square footage
- Number of bedrooms
- Age of construction
Related: How Do You Find Real Estate Comps?
How to Do a Comparative Market Analysis
Comparative Market Analysis with a Real Estate Agent
Most sellers will hire a real estate agent to run a thorough comparative market analysis for them before the house goes on the market. The agent will do all of the work and provide you with a detailed comparative market analysis report. The report will contain useful data on recently sold comparable properties in the same area as the house you want to sell.
The advantage of hiring a real estate agent is that you will greatly benefit from their real estate knowledge and years of experience. Real estate agents have a good understanding of the local housing market they work in. They will likely also have access to comparative market analysis software. Moreover, they are much more skilled at interpreting the results on the CMA. An experienced real estate agent will have visited many of the comparables listed in the CMA report, which will help you to understand why each comp sold for the amount it did. The length and complexity of the comparative market analysis report will depend on the agent’s knowledge and experience.
Related: Real Estate Investment Agent: Do You Need One and Why?
A standard CMA report will contain the following data:
- Active Listings: These are properties that are currently listed for sale. Active listings matter because they are your competition for buyers. However, they don’t reflect the market value until they are sold. Most of them will sell for a lot less, especially if it’s a buyer’s market.
- Pending Listings: These are basically former active listings that are still under contract. Since they are yet to close, they are yet to be a comparable sale. The actual sale price will be at the close of the real estate transaction. However, these listings show the direction the housing market is moving. This means that you shouldn’t price your home above the list price of the pending sales if you want your house to not experience many days on the market.
- Sold Listings: These are comparable properties that have closed recently, usually within the past 3 months. These properties are the most important in a real estate comparative market analysis because they show the market value.
- Withdrawn / Canceled Listings: This refers to houses that were taken off the market because of a number of reasons. The reason is usually that the prices were too high for the buyers. However, listings may also be canceled because of other reasons best known to the seller.
- Expired Listings: Listings expire because they did not sell within a reasonably recent time period. This is usually because they were unreasonably priced and no one bought them or they were not marketed aggressively.
Comparative Market Analysis on Your Own
Hiring an agent increases the cost of comparative market analysis in real estate since you might have to pay them. The alternative is to do your own comparative market analysis. This means that you should know how to find real estate comps. If you are selling your home without an agent and want to learn how to do a CMA, you’ll need the right tools.
You can perform comparative market analysis online by visiting real estate websites with CMA information like Mashvisor. You can use Mashvisor’s investment property calculator to search for real estate comps of properties across the US that are listed on the platform. You can also create a listing for your property in the Mashvisor Property Marketplace and real estate comps will be automatically generated!
Related: Tips for an Accurate Real Estate Comparative Market Analysis
The Bottom Line
Every proper seller who wishes to set a reasonable price that will make them the most money possible should consider running a thorough CMA. A proper CMA will eliminate the dangers of overpricing and ensures that both you and the buyer get a fair deal. The last thing you would want is to set a price that is too high, only to bring it down in a few weeks. By knowing the market value of your property, you will be able to set a fair price that meets the demands of the current market. Consequently, your house will sell quickly. It’s advisable to work with a real estate agent, especially if you are a first-time property seller. However, you can still perform CMA on your own with the help of Mashvisor’s comparative market analysis tool.