What is Comparative Market Analysis in Real Estate?
Setting a listing price is one of the biggest challenges of selling a home. While you want to ensure your price is high enough to make a fair profit, you also want to make sure it’s low enough to attract buyers. This is where comparative market analysis comes in.
Comparative market analysis helps determine a home’s fair market value and, in turn, set a fair listing price. Arranged by your real estate agent, comparative market analysis substantially helps start the selling process on the right foot. At Mark Spain Real Estate, our experts have decades of experience selling homes using in-depth comparative market analysis. If you want to learn more about this valuable real estate selling tool, this blog is for you. Read below for Mark Spain Real Estate’s guide on comparative market analysis.
What is Comparative Market Analysis in Real Estate?
What is Comparative Market Analysis?
Comparative market analysis determines a home’s fair market value by collecting data on similar, recently sold properties in the area. Generally, sellers and their respective agents will evaluate these neighboring properties based on their most significant features like location, age, size, condition, construction, etc.
Next, they will compile a comparative market analysis report, providing a side-by-side comparison of how the subject property compares to the other properties. Sellers will then use this report to accurately price their home, while buyers can use it to make a fair offer on a listing.
What is in a Comparative Market Analysis Report?
A comparative market analysis report details the subject property’s value alongside its neighborhood comparables. There isn’t a specific template or model used to conduct a CMA report. However, some states legally require specific information to be included. The standard CMA report will consist of the following information:
- Address of the subject property
- Address of 3-5 comparable properties
- A description of each property detailing significant features like elevation, floor, number of bedrooms and bathrooms, etc
- The square footage of each property
- The sales price of each comparable
- Dollar adjustments for any differences
- Adjusted selling price per square foot of each comparable
- The estimated price range for the subject property
What are the steps of Comparative Market Analysis?
A thorough comparative market analysis consists of several steps. When selling a home, your real estate agent will be the one to go through each step to compile an accurate report. Below is a breakdown of how a comparative market analysis is compiled.
Evaluate the Area
The real estate agent will first evaluate the quality of the subject property’s neighborhood, as this will determine the listing price. They will consider safety, cleanliness, community amenities, location, HOA rules, etc. 
Gather Information on the Subject Property
Next, the agent will visit the subject property to gather information on its core features. They will review significant factors like the home’s size, age, style, construction, condition, layout, etc.
Select Neighborhood Comparables
Once they’ve gathered information on the subject property, the real estate agent will select 3-5 recently sold, comparable properties in the area. These homes will likely be within one mile of the subject property, be in the same school district, and have similar core features like square footage, lot size, number of bedrooms and bathrooms, and construction.
Adjust for Differences
After selecting similar properties, the real estate agent will adjust for differences between the subject property and its comparables. This typically involves assigning a price to each of the differences and altering the cost of each comparable property appropriately.
Determine the Price Per Square Foot After Adjustments
Toward the end of the analysis, the real estate agent will divide the adjusted price of each comparable by its square footage to determine the selling price per square foot. They will then get the average price per square foot of all the comparables together and multiply it by the square feet of the subject property to estimate a fair market value.
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