What is a Comparative Market Analysis for a Home?

A Comparative Market Analysis (CMA) attempts to look forward at the market whereas an appraisal looks back at the market.  Past results are really the only indicator that can be used to project future outcomes, but just like in the stock market there is no guarantee.  Clearly there are many different factors that determine value and being objective and experienced become even more critical.

The Realtor ® is typically the person that prepares a Comparative Market Analysis (CMA) for real estate.  This analysis includes real estate that is most like the subject property that has sold within a recent time frame within the market area.  Typically sales within the most recent 6 months are viewed because that is the range that most appraisers will obtain comparables for an appraisal.  Keep in mind that the more recent the sale, the more it will likely it will be considered by an appraiser;  some guidelines require only looking back 3 months if there are adequate comparables available in that range.  It can be helpful to go back for 1 full year and at market peaks and bottoms just to see trends.

The market area can be described in many different manners, but typically it is a one mile radius, the zip code, the school district, the subdivision, the county or some other defining factor.  The idea is to find comparables that are the most similar to the subject property in these areas: housing style, number of bedrooms/bathrooms, square footage of the house and/or the land as well as features and improvements.

In addition to sold properties, the CMA includes homes that are under contract or some jurisdictions refer to as being in escrow or pending.  That means that the property is no longer actively available for sale, a specific Purchaser and the Seller have agreed to price and other terms.  This is important information because it shows trends as to how fast homes are selling for as well as whether price adjustments were necessary in order to obtain an offer acceptable to the Seller.

Also the CMA includes those properties active and coming soon on the market for purchase.  If in any given 6 month period of time in any given market segment the same number of homes that have sold and gone under contract is the same as what is active and available, that is considered a balanced market.  One can determine the absorption rate by dividing that number by the number of months.  If the inventory is greater than 6 months, then it is a Buyer’s market, if the inventory is less than 6 months, then it is considered a Seller’s market.

Karen Briscoe and Lizzy Conroy are active and experienced Realtors® in the Northern Virginia, suburban Maryland and Washington DC market place and would be delighted to assist whether for home buying or selling.  Please contact via the means most convenient for you:  www.HBCRealtyGroup.com, 703-734-0192, Homes@HBCRealtyGroup.com.