Figuring out how much your house is worth can be a delicate dance. If you’re thinking about selling your home, pricing too high will scare away potential buyers – while pricing too low leaves money on the table.
Unlike other major purchases, like cars or appliances, you can’t simply look up the value of your home. Your home is unique – even if you live in a home that’s similar to your neighbors’, how you cared for and maintained your home is also a part of its value.
Fortunately, real estate agents are equipped to help you figure out how to fairly price your home based on a number of variables. One of the most important items they use to determine pricing is the comparative market analysis, or CMA.
What’s a comparative market analysis?
A comparative market analysis is a tool used by real estate agents to look at the values of other nearby homes and determine a fair market value for your property. You can think of it sort of like an appraisal, but less formal.
Comparative market analyses give you an idea of what similar homes in your area (your “comps,” or comparable properties) are selling for. Real estate agents use these to figure out how much your home is worth, so that when you sell your home, you know you’re asking a fair price.
What goes into a comparative market analysis?
A CMA isn’t a home value calculator. While there are tools that allow you to put in your address and get a rough estimate of your home’s value, an algorithm is no substitute for deep knowledge of the neighborhood!
When a real estate agent conducts a CMA, they look at many different things, including:
- Number of bedrooms and bathrooms
- Overall square footage
- Features and amenities like a recently-renovated master bathroom or a chef’s kitchen
- Age of the home
- Location, including things like great views, proximity to retail space, etc.
- Condition of the home
Your real estate agent will look at these elements not only for your home, but for very similar homes in your area. They will look for homes within a few hundred square feet of yours, and with a similar number of bedrooms and bathrooms. The recent sale price of your comps, or comparable properties, can help you determine a fair price for a home like yours in your area.
Which properties determine how much my house is worth?
Obviously, if your real estate agent is conducting a CMA, the properties they use to compare your home with matter a great deal. That’s why your agent tries to find properties that meet a few guidelines, such as:
- Your comparable properties should be located within a quarter-mile or half-mile of your home.
- These properties should have been sold within the last six months.
- Your comps should be similar in size and style to your home.
Of course, each of these rules of thumb has a big caveat: Your home may simply not have any comparable properties within a reasonable radius or that have sold recently. That’s why creating a CMA is more of an art than a science – but it’s an art that your real estate agent has mastered.
How can I use a comparative market analysis when selling my home?
A CMA can be an invaluable tool when selling your home. Rather than pricing your home based on your emotional ties to the property or the price you paid for it, a CMA gives you a fair assessment of your home’s value.
Plus, if you receive a lowball offer from a buyer, it lets you point to a specific recently-sold property to justify asking for additional money. You can essentially say, “A very similar house three blocks away just sold for $10,000 more than what you’re offering.” It gives you ground to stand on.
If you’re considering selling your home, it can help to start with a CMA from a real estate professional. They will be able to help you better understand what similar homes in your neighborhood are selling for – and what you might be able to get out of a sale.