Conducting a Comparative Market Analysis (CMA) involves several steps to evaluate the market value of a property based on recent sales of similar properties in the area. Here’s a step-by-step guide to performing a CMA:
1. Gather Property Information
Collect detailed information about the property you are analyzing. This includes:
- Property address
- Type of property (single-family home, condo, etc.)
- Size (square footage)
- Number of bedrooms and bathrooms
- Age and condition of the property
- Features and amenities (pool, garage, upgraded kitchen, etc.)
2. Analyze the Neighborhood
Understand the neighborhood where the property is located. Consider factors such as:
- Location and proximity to amenities (schools, parks, shopping centers)
- Neighborhood condition and desirability
- Market trends in the area (rising or declining property values)
3. Find Comparable Properties
Identify recently sold properties similar to the subject property, known as “comps.” Look for properties that match as closely as possible in:
- Location (same neighborhood or nearby area)
- Size (within 10-20% of the subject property’s square footage)
- Age and condition
- Features and amenities
4. Gather Data on Comparables
For each comparable property, collect the following data:
- Address
- Sale price
- Sale date
- Size, bedrooms, and bathrooms
- Condition and any unique features
5. Adjust for Differences
Adjust the sale prices of the comparable properties to account for differences between them and the subject property. Adjustments can be made for:
- Size differences (price per square foot)
- Number of bedrooms and bathrooms
- Condition and age of the property
- Special features (e.g., a pool, renovated kitchen)
6. Calculate the Adjusted Values
After making adjustments, calculate the adjusted sale prices of the comparables. This helps in deriving a more accurate estimate of the subject property’s value.
7. Determine the Subject Property’s Value
Based on the adjusted values of the comparable properties, estimate the market value of the subject property. This can be done by averaging the adjusted prices or using a weighted average if some comparables are more similar than others.
8. Prepare the CMA Report
Compile all the data and analysis into a comprehensive report. The report should include:
- Information about the subject property
- Details and sale prices of the comparable properties
- Adjustments made to the comparables
- The estimated market value of the subject property
Tools and Resources
- MLS (Multiple Listing Service): The most reliable source for finding comparable sales data.
- Real Estate Websites: Websites like Zillow, Realtor.com, and Redfin can provide additional data.
- Public Records: County assessor and recorder’s office for historical sales data.
- Real Estate Software: CMA software tools like Cloud CMA or RPR can automate parts of the process.
Example
Here’s a simple example of how to adjust for differences:
Subject Property:
- 2000 sq. ft., 3 bedrooms, 2 bathrooms, updated kitchen
Comparable Property 1:
- Sold for $400,000, 2100 sq. ft., 3 bedrooms, 2 bathrooms, standard kitchen
Adjustments:
- Size adjustment: -$10,000 (for 100 sq. ft. difference)
- Kitchen upgrade: +$15,000
Adjusted Price of Comparable Property 1:
- $400,000 – $10,000 + $15,000 = $405,000
Repeat this process for all comparables and then average the adjusted prices to estimate the value of the subject property.
By following these steps, you can conduct a thorough and accurate CMA to determine a property’s market value.