You may have heard realtors throw around phases like "I will pull some comps" or "based off of my CMA..." when you're in the discussion of making an offer to purchase a home or deciding what price to list your current home.
So, what does CMA stand for and what does it mean?
CMA = Comparative + Market + AnalysisIt is an estimate of a property's value, provided by a licensed Realtor. Values are based on the prices of similar homes in the area, ideally within a half mile radius over the last six months. They consider active, under contract, and sold listings that are comparable to the home being valued (subject property) - meaning similar qualities such as square footage, location, acreage, condition, build year, etc. The differences are then calculated as $/SF, $/Garage, etc. and adjustments are made appropriately to the subject property as an increase or decrease to its value.
There are many reasons why it is important to have a well-estimated CMA from your realtor, as both a buyer and/or seller. Here are a few:
- For obvious reasons as a buyer, you would not want to over-pay for a property. If you are using a loan to purchase a home, you also don't want to offer a price that will not be supported by the valuation of your lender's appraisal, unless you are prepared to make up the difference and pay that money out of pocket at closing.
- As a seller, you'd ideally get the highest dollar for your home, so you don't want to price it too low. Yet, you also don't want to price it too high, which may result in a lengthy number of days on market or multiple price reductions which can lead to poor conceptions by buyers.
- Investors also benefit from a knowledgeable Realtor's CMA to determine what properties have potential to be bought, renovated, and sold (or rented) for a profit.