Whether you are an owner deciding to sell your home, or a qualified buyer looking to purchase a home of your own, it makes sense to hire a quality, professional real estate agent to serve and represent you, your needs and priorities, and your best personal interests. One of the essential first steps in this process should be the use of a professionally designed, relevant, realistic and well-explained Competitive Market Analysis, or CMA, to guide you towards the smartest strategy to use, in terms of pricing, marketing, sale and / or purchase and procedure, in a conscious and well focused manner. With that in mind, this article will attempt to briefly consider, examine, and review 5 things that this document should consider in its entirety.
1. Recent/last 6 months: Historically, we used to suggest using only homes sold in the last year to create this. More recently, that time frame was reduced to no more than the last 6 months. Many believe that these days, where home prices seem to be rising, at or near record rates, we should consider an even shorter period! It is not, in truth, relevant, in most cases, what the home was purchased for, and/or, the cost of the improvements, the owner of the home put in, since he owned it! Rather, it’s more about how a specific home stacks up against the competition.
2. Quality/Feature Comparisons: Don’t compare apples to oranges! Use properties that are as similar as possible in all relevant areas, including location, home size, property size, property taxes, upgrades, features, and curb appeal!
3. Similar areas/neighborhoods: Most of us have heard that all real estate is local, and while much of that is true, perhaps the key is that the price is often directly tied to the specific area and/or neighborhood, and what it offers, including school systems, property taxes, amenities, crime rate, etc.
4. Not only what sold, but also what didn’t: A comprehensive, meaningful, and professionally designed competitive market analysis should include what sold in the target period, as well as what didn’t sell or took more days on the scoreboard to sell. What was the relationship between price and days on market? What listings, expired, unsold, and what are the likely reasons? What percentage did you sell, versus fail, and what type of real estate market is it, currently (sellers, buyers, or neutral)?
5. Relationship between the listing price and the sale price: It is often said that the real estate market will find the sale price and listing price to be merely a tool and/or a starting point. In the existing market, how long does it take and how close to listing price does the house sell for? All of these factors must be considered as part of preparing this valuable document for clients!
Smart clients and the best agents effectively create and use competitive market analysis to achieve the best results! The more everyone understands, uses and respects this process, the better the transaction period will be!