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A Comparative Market Analysis (CMA) is routinely done for sellers to determine a listing price for their home based on current market conditions. Knowing how a CMA is created will help you understand why it's so valuable in finding a home's market value.
Comparables (Comps) Are Selected
The listing agent locates three or more recently sold homes comparable to the one ready to be listed. The best comps will:
✓ Be as near as possible to the home ready to be listed (same neighborhood, if possible).
✓ Have the same features or as near as possible (bedrooms, baths, garage, etc.).
✓ Sold as recently as possible, because the older the sale, the less reliable the CMA.
Sold Prices Are Adjusted
The sold price is adjusted to account for differences in features or characteristics. If the comp has one less bedroom, the value of a bedroom is appraised or estimated and added to the sold price. If the comp has one extra bedroom, the value would be deducted from the sold price. This brings the total sold price to an estimated amount based on if the comp had identical characteristics with the home in question.
Average Sold Price per Square Foot
Once the adjusted sold prices are calculated, they are averaged to find the average sold price per square foot. This number is multiplied by the square footage of the home ready to be listed to establish a tentative listing price.
There are several variables that make this an exercise in estimation, not a nailed-down price. It is as accurate as possible based on the comps selected, but there is some flexibility in the final pricing.
Want to know what your home is worth in the current market? Contact me today for a CMA.
