Silicon Valley Real Estate

A Comparative Market Analysis (CMA) is an in-depth analysis done by real estate agents to determine the value of a property in the current market.  A typical CMA uses the sales comparison approach, which is based on the principle of substitution. This approach assumes a buyer will pay no more for a property than it would cost to purchase a comparable property.

When researching to develop a CMA, information is collected by the real estate agent on recent sales of properties similar to the property being valued.  These are called "comparables." Although current Active (For Sale) and Pending (under contract) listings may be included in the CMA for information purposes, only Sold properties are used in the determination of a property's value, as these represent amounts actually paid or agreed upon for properties.

Since comparable sales aren't identical to the subject property, adjustments are made for such things as square footage, number of rooms, lot size, date of sale, location, style, amenities, etc.  The purpose of these adjustments is to determine the price that would have been paid if each comparable sale were identical to the subject property. If the comparable is superior to the subject property in a factor or aspect, then a downward adjustment is made. Likewise, if the comparable is inferior to the subject property in an aspect, then an upward adjustment is made. From the analysis of adjusted sales prices of the comparable sales, an estimated market value is derived for the subject property.

The CMA report includes detailed information about the subject property, and the comparable properties.  In most cases, the CMA report will give a price range rather than an exact price. This is because, even though a significant amount of analysis goes into developing the CMA, the price derived is somewhat subjective. 

A CMA is not an appraisal.

A real estate appraisal is a comprehensive evaluation performed by a licensed or certified appraiser. Appraisal reports are used as the basis for mortgage loans, for settling estates and divorces, for tax matters, etc.  For mortgage valuations of residential property in the U.S. the appraisal is most often reported on a standardized form, such as the Uniform Residential Appraisal Report.  Typically, a CMA prepared by an experienced agent with good knowledge of the local market is in line with the property‚Äôs appraised value.

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Posted by Craig Jelinek on June 20th, 2013 1:21 PMLeave a Comment

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