CMA stands for “Comparative Market Analysis,” and it’s Realtor-speak for finding out how much a home is worth.
There are basically 3 ways to discover a home’s value: offer to the buy the house at a price, get an appraisal, get a CMA.
1. Offer to Buy the House
When you offer to buy a house, you’re going to attach a value to that offer. If the seller accepts, the house was worth less than that price. If the seller rejects, the house is worth more. Pretty simple, but also very expensive!
2. Get an Appraisal
Since offering to buy the house is a pretty expensive way to learn it’s value (…and what if you guess wrong?), an alternative is getting a report from a licensed appraiser. These real-estate professionals have been extensively trained on how to locate similar properties for sale, evaluate aspects of the property that create value, and return a report to you of what the home would likely be worth if it were placed on the market. For their service, you’ll likely pay several hundred dollars to get the report.
It’s a pretty reliable number — reliable enough for lenders to base their decisions to lend on! However, it’s also a costly way to learn what a home is worth.
3. Get a CMA
Okay, you guys knew I was moving toward this! The CMA is conducted by a Realtor who pulls comparable homes in the immediate area. “Comparable” means same home type, same home age, same number of bedrooms, same number of bathrooms, etc. The Realtor will locate as many home sales as possible within the shortest time window with as many similarities as possible.
Obviously, not every nearby home sale will qualify as a “comp,” so the Realtor will likely have to adjust some of the comps. This is as much art as it is science, and this is one of the BIGGEST reasons why you need an experienced Realtor working for you. The more experienced the Realtor, the better the pricing assessment.
I produce a report that can be literally a hundred pages thick — complete with photographs of comps — in order to justify a price point for a home.
I want to be very careful here to disclaim that a CMA is not your home’s value — only an appraisal can officially certify that number. A CMA is properly considered a starting point for the pricing strategy on the home. It’s a part of the marketing plan for the property. If you overhear someone talking about the value of a home, technically that person better be a licensed appraiser. Thank you, all you awesome appraisers who work tirelessly to support our industry!
Get a CMA