What is a CMA in real estate? A complete guide

If you’ve decided to sell your home after owning it for a few years or a few decades, you’ll likely be asking yourself, What would be a fair price to list it at?

Using a comparative market analysis, or CMA, real estate agents compare recent sales of similar homes in your area to estimate the market value of your home. A CMA can give you a sense of what a home is worth, allowing you to list yours at a competitive price point, or know if a home you’re thinking of buying is fairly priced.

What is a comparative market analysis?

A CMA examines the prices homes in an area sell for to determine the value of a specific home. It looks at properties of roughly the same size, with the same number of bedrooms and bathrooms, and in a similar location to establish a baseline for home prices in the area.

Real estate agents and other professionals use CMAs to estimate home values when helping a client decide on a pricing strategy for selling their home or how much to offer for a home that’s for sale.

Why a CMA matters for buyers and sellers?

CMAs are important for both home sellers and buyers.

Sellers can use a CMA to estimate how much their home can sell for, helping them list it at a price that will attract offers without underpricing the property.

Buyers can use a CMA to make a reasonable offer without overpaying.

How agents prepare a CMA

Preparing a CMA requires the following steps:

1. Gather data on the property. The analyst will review the details of the home being evaluated. Common details include the square footage, number of bathrooms and bedrooms, features such as a pool or deck, and the year the home was built.
2. Look for comparable homes that sold recently. Next, the analyst will look for recent sales of nearby homes with similar features. If you’re running a CMA on a three-bedroom, two-bath home, you’d look for recent nearby sales of three-bed, two-bath homes. It’s common to follow the rule of three, meaning you find at least three comparable sales.
3. Adjust for any differences. Every home is unique in some way, so you’ll need to make some adjustments. If the comparable home – usually referred to as real estate comps – are slightly larger than the one you’re analyzing, for example, you’ll want to reduce your price a bit.
4.  Analyze market trends and conditions. Finally, the analyst will try to account for trends in the real estate market, such as whether it’s buyer’s market or a seller’s market. If the market is heating up, you may be able to sell your home for more than the comparable sales prices.

What’s included in a CMA report?

If you’re getting a CMA report on a property you want to buy or sell, you can expect it to include the following elements.

Subject property overview

The first part of a CMA report is usually the subject property overview. It describes the basic details of the property whose value is being reviewed, including its address, square footage, lot size, special features, number of bedrooms and bathrooms, and year of construction.

The person preparing the CMA uses this information when searching for real estate comps.

Recently sold comps

Next is a list of comparable homes that sold recently, preferably in the past six months. They will be similar to the home being analyzed in factors such as location, size, and features.

These provide a strong indication of the home's value because they show what buyers have recently paid for similar homes.

Active listings

The report also lists comparable homes that are currently for sale but not yet sold. This can be useful for showing the level of competition in the market and the potential price positioning of the home being analyzed.

Pending or under-contract properties

This section describes similar homes that are active under contract or have a pending sale. They have not yet sold, but barring unforeseen circumstances, they are expected to close soon. Like active listings, they can provide information on price positioning and competition in the market.

Adjustments for differences

The analyst describes the adjustments they made based on differences between the home being analyzed and the comps. For example, one home may have slightly more square footage or have a pool. Naturally, a smaller house or one with fewer features will be worth less.

Common adjustment factors include:

• Square footage
• When the home was last renovated or updated
• Number of bedrooms and bathrooms
• Lot size
• Whether it has a garage
• Features such as a pool or deck
• Lot view or desirability

Market condition analysis

The real estate market is ever-changing, so market conditions may cause the home being analyzed to be priced differently than the comparable properties. The analyst will note whether the market is heating up or cooling down, and how that affects the price recommendation.

Price recommendation

The culmination of the report is the price recommendation or property valuation. The analyst preparing the CMA usually won’t give a single number, but rather a price range that has been determined using the details in the CMA and their knowledge of local trends.

The recommendation also may depend on the seller’s goals. For example, pricing the house to attract more bids or help it sell quickly. Listing it on the higher end may result in a slower sale, but it helps the sellers get the most money out of the home.

When to request a CMA

There are three scenarios where requesting a CMA is a good idea.

• When selling a home. Request a CMA before you list the home for sale so you can get an idea of what price to list it at.
• When making an offer to buy a home. Your agent can produce a CMA to tell you how fair the listing price is and whether you may want to offer more than the asking price.
• During a property tax assessment or a loan refinance. A CMA could be a useful tool if you want to get a sense of your home’s fair market value to decide if you should contest a tax assessment or if refinancing would allow you to stop paying for PMI because your home has increased in value.

If you’re buying or selling a home, you can ask your agent to do a CMA for you. In the third scenario, you may need to reach out to a real estate agency to ask for help with conducting a CMA.

CMA vs. home appraisal: Key differences

CMAs and home appraisals both estimate the fair value of a property. However, there are some key differences.

One is who conducts them. CMAs are usually done by real estate agents, while appraisals are conducted by licensed home appraisers who work with lenders.

They’re also used in different ways. CMAs are used when determining the price at which to list a home or how much to offer when buying one. Appraisals usually are ordered by lenders to verify that the home’s value is high enough to justify a loan against it.

Assessments, which are similar to appraisals but conducted by a government official, are used to determine how much property tax a homeowner must pay, and by lenders who want to ensure a property is worth enough to serve as collateral for a loan.

That difference in use case is one of the reasons that CMAs tend to be less formal than appraisals. In general, CMAs are used earlier in the process of buying or selling a home, while appraisals occur after an offer has been accepted and mortgage lenders get involved.

FAQ

CMAs are an essential part of the home-buying and selling process, so it’s important to understand how they work.

How much does a CMA cost?

The price of a CMA can vary depending on where you live and who you hire to compile it, but expect to pay between $200 and $400. If you’re working with an agent to buy or sell a home, many will offer a CMA for free as part of the services they provide.

Can I do a CMA myself?

It’s possible to do a basic CMA on your own using publicly available property data. However, the real estate market is complicated and market conditions change often, so a real estate professional will be able to give you a much more accurate CMA than one you can do on your own.

How many comps are used in a CMA?

In general, agents aim to include at least three comps when doing a CMA, but may do as many as five if there is enough market availability.

How accurate is a CMA?

CMAs provide a reasonable estimate of what a home is worth, but there’s a reason that most give a value range rather than a single number. They’re less formal than appraisals, which are typically more detailed and accurate.

Is a CMA required when selling a home?

No, you are not required to get a CMA when selling a home, but that doesn’t mean you should skip it. CMAs help set a realistic and competitive price for your home and often come free with the services of your real estate agent.

The bottom line: A CMA is a valuable tool when determining a property’s value

A comparative market analysis is a useful tool for both home buyers and sellers, letting them feel confident that the price set for a home is fair. Whether you’re buying or selling, work with an experienced real estate agent to conduct a CMA to make sure you’re getting a good deal.

Once you’ve found a home within your price range, start your mortgage application with Rocket Mortgage^®.

This article is for informational purposes only and is not intended to provide financial, investment, or tax advice. You should consult a qualified financial or tax professional before making decisions regarding your retirement funds or mortgage.