What is Comparative Marketing Analysis (CMA)? It is the process of evaluating similar homes, which are recently sold, also which is near the home that you are planning to buy or sell. These homes which are used for comparing is known as the Comparables. A CMA is performed by the real estate agents, buyers or sellers to establish a price range which can be fixed for the home under construction. The price range which was derived from the process of CMA is later used as a guide, to decide the listing price or an offer price. Comparative Marketing Analysis is not just about comparing numbers. One should have a thorough knowledge on the dynamics of selling properties in the respective areas and should make judgements, based on the given data. The process of Comparative Marketing Analysis involves comparison of similar homes to the home, which is to be bought or sold. Features like age, location and size of the comparables are taken into account. The answer is derived by comparing the features of your home to be purchased with the features of the other similar homes. It is not easy to derive at this answer simply. In short, the process of Comparative Marketing Analysis is to: Define the criteria for choosing the comparables, determine the list of comparables with good quality, evaluating the comparables, adjusting the differences of the comparables by size, location etc and finally estimate the value for the home you have targeted to buy. Below are some of the elements which can make the Comparative Marketing Analysis more effective:
- Comparable properties to be collected carefully: See that you are able to justify the comparables, you have not chosen. You should have a good reason, when you decide that a comparable is not required for your analysis. Make sure that the comparable properties are collected from the area of the selected property or somewhere nearby. See that your chosen comparables are not too old. Stick to the current time frame as much as possible. Also prefer for the property of the same construction type.
- Adjust the value for differences: There will always be differences, when you are comparing similar properties. Make sure you adjust the estimation of your selected property’s value for the difference from the comparables. Consider the difference in financing, which could have influenced the sale price. Remember that a property which was financed may not reflect its true value and may reflect only a higher price.
- Analyse the current competitive market: Analysing the market for the listed properties is definitely required for a full and complete report of your listing prospect. While recommending your list price, you could modify it a little higher or lower, depending on the number of homes listed in that area, along with their list prices. Coming to an understanding that the comparables sold in a higher value belongs to a period, which had a low inventory could lead you to amend the list price estimate, a little lesser if the current market carries a higher inventory.
- Display the results in an easy and understandable format: There are lots of software solutions available, which can produce reports with a polished look for Comparative Marketing Analysis. The value is carried by the data you present and the interpretation you give for the same. Let your interpretation and selection take a higher importance than the value of the presentation.
Keep in mind that the above elements should be given additional care, when you are doing a comparative analysis before purchasing your home. All the best!
I am Michael Chloe, 24 years old, writer for last 3 years on the real estate. I have dedicated myself to being a full time real estate agent. I enjoy sell and buy of the condos and also writing on the Toronto condos.
