Comparative Market Analysis
A Comparative Market Analysis (CMA) is a report prepared by a real estate agent that evaluates the value of a property based on recent, comparable sales prices. The purpose of a CMA is to assist sellers in pricing their property at a point that attracts buyers without leaving money on the table, and to help buyers put together an offer.
When analyzing comparables (comps), agents will consider the following:
- Location
- Lot Size
- Square Footage
- Age and Condition of Property
- Special Features (swimming pools, fireplaces, garages, finished basements, patios, landscaping, etc.)
- Number of Bedrooms & Bathrooms
- Architectural Style
- Sale Date
- Zoning
- Real Estate Taxes
Based on similarities and differences between the properties, they will then price out features and adjust the valuation.
Aside from the quantitative nature of the analysis, CMAs also incorporate more subjective factors such as neighborhood, market conditions, and potential for upgrades. Following the Rule of Threes, CMAs should always consider 3 or more recent sales of similar properties. When there have not been enough sales within the last 3-6 months, agents may look at pending sales, expired listings, and properties currently on the market for insight. Other agents may also select comps located in an area that is considered similar due to the quality of local school districts, crime rate, noise level, proximity to amenities and so on.
It is also important to note that a CMA is not the same as an appraisal, which is performed by a licensed appraiser as opposed to a real estate agent.
Benefits of Comparative Market Analysis
Comparative Market Analyses are beneficial to both buyers and sellers looking for the fair market value of a property. By providing an unbiased look at the current market in the area, realtors can determine both an appropriate listing price for the subject property and a competitive offer.
Comparative Market Analysis at EquityMultiple
When looking at comparable properties in commercial real estate, analysts will look at numerous features and statistics not necessary for residential CMAs. These include average rental rate, vacancy rate, capitalization rate, number of units, zoning regulations, and supply and demand in the market area.
At EquityMultiple our Real Estate Team puts together a CMA for every property listed on the platform. The report is included as “Comparable Sales” in offering memorandums for investors to review when considering their investment.
If you have questions about any of EquityMultiple’s past or current investments, please feel free to contact our Investor Relations Team.