Comparative Market Analysis: Ultimate Guide to a CMA in Real Estate

Cody Cromwell
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What Is a Comparative Market Analysis?

A comparative market analysis is a detailed analysis of the real estate market in an area, and its significance can be a key factor in your decision of whether or not to purchase a particular property.

Conducting a CMA involves three main components:

Identifying Comparable Properties: This is the initial process that you’ll need to go through. First, you’ll need to find comparable properties for your area. In order to do this, you’ll need to have access to similar properties as those of the property you’re attempting to analyze. The availability of similar properties could be made easily with websites like the MLS, Zillow, Trulia… or even asking your realtor.

Actual Data Gathering: This involves actually gathering data on each comparable property in order to get a more accurate analysis. For example, say that you found 10 similar properties to the property you’re trying to analyze.

When Is a CMA Necessary?

Every real estate transaction involves an offer and an acceptance of an offer. Where the real estate transaction involves a multiple offer situation, a comparative market analysis is designed to help buyers, sellers, lenders, and home buyers understand the market value and how it compares to the asking price.

A real estate buyer has the ability to obtain a comparative market analysis when using a broker. A real estate broker can perform a comparative market analysis for the buyer at no charge to the buyer.

A real estate seller can request a comparative market analysis when selling a home, thereby allowing more knowledge on the seller’s part to future buyers’ offers, and making the eventual sales price more competitive.

A lender who requests a comparative market analysis will have a more accurate representation of the home’s real value as compared to the sale price. A CM analysis also allows a lender to compare the sale price to other similar properties in the surrounding area, as well as identify the home’s current market place value.

One of the most popular uses of a comparative market analysis is in rental real estate. It provides a complete analysis of the rental market as well as a breakdown of the comps for tenants. The CM analysis also allows real estate managers to determine how the apartment’s current rents compare to similar apartments, market price, and number of apartments available.

For a Seller Listing Appointment

How Long Does the Process Generally Take?

The alternative to the buyer’s agent is the listing agent. The listing agent is the real estate professional who takes the listing information and implements the marketing strategy for the real estate agent.

The listing agent is the one who puts the property in contact with the buyers. The list agent is the one who negotiates the ultimate price of the property and creates the final sales contract with the buyer. The real estate listing agent represents the buyer or seller in all real estate transactions and ensures the parties comply with all the terms of the contract including information exchange and setting the closing, settlement, and closing date. They can remedy all ethical violations and help you resolve differences in the contract.

The listing agent might bring the buyer to the table or contact the buyer through lead generation. It is the listing agent’s responsibility to do the research so that the buyer is interested in looking at the property and getting the property ready to accept offers. The listing agent handles the appointment and handles the negotiation of the price. This is also the agent who decides how soon the property will be on the market for a list.

When Finding a Good Deal for a Buyer

Comparative market analysis (CMA) is one of the most important tools in a Realtor’s arsenal. The Comparative Market Analysis (CMA) is the comparison of the current and future market trends as it relates to a home by using consistent and reliable market data. A CMA should not analyze only the past six months, but it should be a look back at the housing market which is a few years ago at this point. The market is a reflection of the era and the time that it happened. Using a CMA will help eliminate any sporadic or partial points of view. It will be clear, unbiased and provide the buyer with a complete market analysis.

To create a Standalone CMA, we use a type of Report Card Quality (RCQ) in each area of the residential market. We believe that the RCQ is the only unbiased way to review the overall health and quality of the residential market. A CMA buyer is able to compare individual assessment results to assess and determine if the market is strong, weak, up or down.

How to Create a Comparative Market Analysis

(CMA)

A Comparative Market Analysis (CMA) is essentially a snapshot analysis of the current market conditions and the market trends that may impact the value of your home, including the market analysis of surrounding comparable properties.

Buying and selling a home is a huge investment that is not one to be made in haste. CMA’s are completed by trained professionals with an in-depth understanding of the local market and real estate trends.

A CMA is one of the most important tools used in the home-selling and home-buying process and plays a vital role in the final sale and purchase price of your home.

A CMA can be used by the local assessor to value your home as well. This is a very important consideration. When you price your home, your valuation may not be based on the true value of the home unless there is an elaborate analysis of the home’s current market conditions.

A CMA proves to be essential in a situation in which the current market value of your home does not reflect your true investment. In such a case, it is important to analyze the market trends of an individual area, which is in turn beneficial to the buyer.

A CMA also proves mid-term investment and future value of your home.

Assess the Quality of the Neighborhood

One of the most essential parts of conducting a comparative market analysis is to make sure you have a good idea of the quality of the nearby neighborhoods. For starters, you’ll want to determine the walkability score of the neighborhood to ensure you don’t choose one that’ll be too far away. There are numerous websites that will give you this kind of information, but it can be difficult to gauge the accuracy of their score. For this, you may want to consider going to a few open houses or driving around the neighborhood to get a feel for how walkable it is.

You should also look at your home’s location relative to the schools in the area. Although this doesn’t entirely determine the quality of the neighborhood, it’s a factor that may influence whether or not you want to relocate there. You may want to consider a home that’s located in a neighborhood with good neighborhood amenities, such as a community pool, a rec center, or a local church that hosts weekly activities.

Assess the Original Listing (if Available)

If the property you’re about to buy has an agent list it as a comparative market analysis (CMA). This will be a list of similar properties that have recently sold in the same neighborhood or area. This is also useful information before you ever list the property with an agent.

The agent will provide such CMA information from the Listing Summary Report. The agent can also tell you if the listing is an Open House or an already sold property.

Once you acquire the Listing Summary Report, the next step is to compare the CMA with the property you are interested in buying. The CMA will tell you how much and what percentage the property’s value has changed since it’s been listed. Be advised, however, that in some areas, the property’s value may not have increased or decreased at all. That’s why you should not rely solely on a CMA in providing to support your acquisition price. It’s also important to compare the property’s size and the neighborhood’s market comparisons.

Check Property Value Estimates on Zillow & HouseCanary

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To estimate the sale price of a property, it’s important to use more than one source – because the value they come up with will likely differ.

Zillow, the largest real estate database on the Internet, is one of the most popular sources for property value estimations. The site also has its own type of home value estimate – more like a snapshot of what’s currently selling for in the neighborhood.

One general rule of thumb Zillow users like to follow is to take the median sale price of the neighborhood, plus 10%, or the median sale price minus 10%, whichever is lower.

However, Zillow has its drawbacks. First off, it’s calculated in some weird way that doesn’t seem to consider any type of market saturation. This means that if a home is the only one available for sale in a neighborhood, a buyer would want to pay more for the home since they know that no one wants to buy the other one. This is an issue since Zillow doesn’t take such a huge factor into consideration when it comes to estimating or calculating the value of a property in a given neighborhood.

Start Creating Your Preliminary CMA

United Real Estate is a top-rated full-service real estate brokerage located in San Diego, California.

United Real Estate's President Chris Wagner gave business owners and sellers a market analysis session to show how he turns competitor's web sites, Google searches and competitor ads into a preliminary market analysis report, and how he uses this information to set the right price for the seller and to set realistic sales expectations for his buyers.

The technology that Chris uses was developed by a company called RealTrends, which has been around in the real estate industry for about a decade.

The report Chris gives his clients is based on an extensive database of national statistics, and provides comparable sales data as well.

This information was obtained from all over the country. This report can help your business grow both in sales and profits.

This report generates a monthly or bi-monthly profit report for the seller.

So, how did the presentation go? All told, some 100 businesses attended this event, and based on the feedback received there are many other business owners that would like to learn more about what United Real Estate can do for them.

Hopefully, Chris’s presentation has piqued your interest in what is known as a comparative market analysis. A CMA is an economic analysis of the demographics, income levels and financial health of a specific area.

Get an Average Price from Comparable Listings

A Comparative Market Analysis (CMA) is a one of the most efficient and effective tools available to the Realtor to help estimate the current market value of the real estate property being sold.

There are multiple ways to approach a comparison in a CMA. One of the easiest and most common methods is to average the homes that have recently been sold in the neighborhood or the city.

This is usually referred to as a Top-Down CMA or a Numbers-Only CMA.

The Top-Down approach relies on several houses that have recently sold to create an average price.

Top-Down CMA’s must be carefully compiled. Because these calculations are subject to change you should consider these averages as a floor of the average price.

Top-Down CMA’s must be carefully compiled. Because these calculations are subject to change you should consider these averages as a floor of the average price.

From the Top-Down CMA you can use a lower limit of average that can be used to market an offer.

Top-Down CMA’s often have an upper limit of average that are averages based on the very highest prices. This approach is less common than the Top-Down CMA.

Assess the Home in Person

Online, and by Agent/Broker.

Do you have any home for sale, rent or lease? Do you have any pending listings? Usually, the earlier you start the better. But the longer you delay, the more difficult it becomes. Choosing to hire a consultant that is also proficient in real estate marketing helps. A comparative market analysis (CMA) can be just the ticket.

A useful indication of current market conditions in conjunction with listing data will help guide marketing decisions.

A good consultant will interpret available information, survey the area and show you exactly what you need to know about the market. From there, they can guide you in making the most of the property’s best features, selling its potential and identifying the appropriate marketing avenues.

For sellers, a CMA is usually used to set a reasonable asking price. Depending on a property’s physical condition, market conditions and performance, a Property Appraiser can be requested to ascertain proper appraisal value.

To get the best possible sale price, the Property Appraiser will take into account, actual and fair market value. A comparative market analysis is also useful to determine the market price of comparable properties in the region.

Prepare Final CMA for Your Potential Client

A market analysis can be a very useful tool in real estate. It can be a great way to figure out an average price range of a single-family home you’re interested in. Or, you could compare the price of an average home in your neighborhood to other neighborhoods in your local area. But before you embark on your CMA, there are a few things to consider.

If you’re not acquainted with market analysis, it’s often the first thing a real estate agent would present to you in order to illustrate the “demand” for a house. Is there any demand for this home? What does real world data tell us about the amount of people who are interested in bidding on this property? The best way to answer these questions is most often to compare your property to other homes in your area. Most real estate agents would present you with a comparative market analysis, or CMA.

Use CMAs to Nurture Top of the Funnel Leads

A comparative market analysis (CMA) is a part of any successful sales-driven business. An effective CMA captures the perceptions and experiences consumers have with a competitor’s offer through data and insights. For the real estate industry, a CMA helps uncover trends and opportunities that can propel your business to new heights. And the more you know about the landscape, the sooner you can make an impact.

It’s easy to get overwhelmed when it comes to CMAs. They’re a comprehensive value proposition of sorts that dominates your marketing plan and requires a significant investment of time, money, and resources. So, it’s important to break down your CMA strategy so you can maintain focus and efficiency.

To help start your CMA search, we’ve assembled a list of questions to ask yourself to scope out the competition. These guidance questions will help you zero in on what you need to include in your CMA strategy.

What is the competitive landscape?

Start by gathering the information you need to start your CMA search. Once you have a good idea of the top of the funnel competitive landscape, you can ask your key questions.

10 CMA Tips from the Pros + Example CMA

This guide is intended for real estate professionals who are looking to work their way into the very rewarding world of comparative market analysis in real estate. If you are excited to discover more about comparative market analysis, you’ll find lots of valuable information in this guide.

We are authors of Comparative Market Analysis: What is CMA, Why is it Important, and How to Begin a CMA in Real Estate. You can get a copy of it by clicking here.

Avoid Using Smaller Comps & Adjust for Condition & Location

Comps come in multiple forms and can be used solely or as part of a home’s marketing toolkit. Still, no matter how comprehensive, it’s normal for the process to result in different figures. To help with mistakes, always reference smaller comps if they’re in your area. If they’re nearby, the figures will likely be more accurate, and if they’re far away, the adjustments for square footage and condition will be less significant.

Once you’ve looked at a large range of homes and have a pretty good idea of what’s available, you’ll be able to properly adjust and focus on the price you can expect.

The discount rate is adjustable and figured out before each comp’s comparison. Keep in mind that it’s impossible to get an absolutely accurate number. But more often than not, you can refer to a range that both represents your home’s condition and location.

Start your CMA by examining comps in the neighborhood, using a smaller region, or even a street. Usually, comps within a 10- to 20-mile radius work well for home sales. More than that might be misleading and result in confusion.

Make Sure Your Comps Are as Similar as Possible

Though a comparative market analysis (CMA) can tell you a lot about a neighborhood, home, or building in real estate, there are some assumptions that are made when performing the report.

The most important assumption is that you start with a comparable market segment. Comparables are what you use to determine market comps. But a big question to ask is if you are starting with similar homes or not.

A comparable is a similar home or apartment that has a similar grand list price. For example, if you were looking for a 3-bedroom, 2-story home, you can use the real estate data for that specific home and set your own comparables to it. As you compare comparable homes, they should be similar in other areas as well. When it comes to neighborhoods, you want to look for similar price ranges and number of bedrooms.

So, even though your documentation from your potential agent may list some sales in the area, be sure you are comparing CMA’s from neighborhoods or ZIP codes with similar characteristics to yours.

When you perform a CMA, be sure to know the neighborhood’s price point before you start your search. Though it is best to go with the highest price point under your preferred location and number of bedrooms, other factors can effect the outcome as well. For example, mortgage rates and home prices might be higher in a nearby larger city.

Keep Up on the Latest Technology

Technology is constantly changing its shape and its purpose. With so many new technologies coming out, it’s hard to keep up on all of them. Thankfully, there is one market within real estate that has remained relatively unchanged for the past two decades. That market is the comparative market analysis (CMA).

CMA’s are expensive, but the results can be nothing short of priceless in terms of marketing and decision making. Take a look below at the overview of a CMA, some of its benefits and the way that we can wrap our heads around the data and determine market value, pricing, demographic and more.

As Real Estate Marketplaces continue to grow, the benefits of a Comparative Market Analysis are profound in terms of how it can help push your business forward.

Go Beyond Square Footage to Get the Most Accurate Value

When it comes to real estate, it’s easy to get caught up in the number of homes on the market. But that’s not the only reliable marker of home value. Real estate investors and developers need to look beyond square footage to get the most accurate value for their properties. Here’s why, and how you can take advantage of it as a property evaluation or renovation project manager.

Square footage isn’t the right measure of the value of a homeΩbut it can be used as a guide.

According to the Department of Housing and Urban Development (HUD), …preserving the status quo simply by increasing a home’s square footage won’t necessarily increase its value.

That’s because there are a lot of things that go into determining home value, including location, condition of the home, neighborhood, and other factors. It’s much more accurate to use a non-standardized value method when dealing with a real estate transaction.

Non-standardized value methods are more accurate when it comes to evaluating home value.

In our experience, the following methods are the most accurate when it comes to evaluating and projecting real estate values:

Zoning and Building Code Exception Analysis

Don’t Let Aesthetics Get in the Way of Your Data Analysis

Conducting a comparative market analysis (CMA), or CMA analysis, is an integral step in the process of evaluating the market conditions and opportunities in your real estate project. But you should be wary of falling in the trap of A/B testing features and aesthetics, which can alienate potential buyers instead of attracting them to your listing. Even in the best of circumstances, different types of homes in your exact neighborhood will look different upon completion. As much as you might consider the home a showcase for your own work, its most effective representation will be to stand as an example of what you can deliver for future clients.

keep your eyes on the data

Those who don’t let aesthetic concerns get in the way of representational data might be surprised to discover that homes in their own communities that would have earned top marks in their A/B tests may have also proven unpopular with potential buyers. In many instances, they are not going to share the same appeal as the typical home in their neighborhood. Instead, homes in their own neighborhoods will more closely reflect the neighborhood in which they are located, which is why retaining a common aesthetic in all homes in a community could be useful.

don’t overthink it

Make Sure Your CMAs Are Easy to Understand

One of the biggest mistakes I see people make (and one of the most crucial) is not breaking down each CMA by asset type, owner category and location.

I am a firm believer that the TOFR is not very useful by itself unless broken down into asset type, owner category and location. From a consumer’s perspective who is trying to compare apples to apples, the TOFR will only tell you the final sales price range for the establishment.

The information in this report is helpful, but not all TOFRs are created equal. If you are going to invest in real estate, you need to understand the TOFR and be able to interpret it.

The key part of the TOFR is broken down by owner, and that is what you want to compare across properties.

The only way to tell if you will be buying an owner occupied or a investor occupied foreclosure is to look at the owner category. This is the breakdown of the TOFR.

In order to understand how the breakdown works, you have to understand that in the TOFR, the sale price is broken down into reporting categories. Some examples are the –As-Is” and –Build-out” categories.

Show Pricing Trends in Your CMA

Don’t get bogged down in talking about price drops and market fluctuations too thoroughly with your CMA survey. Your real estate agent needs to know the state of the market, so she can price her listings accordingly. But you, as the buyer, need to keep track of cost trends.

By doing some quick calculations, you can determine if the price your real estate agent is quoting you is going up or down. Start by subtracting the price of identical properties from the starting list price in question. After that, compare the result to the original price to see how far off from the list price it is.

If the price change is lower than what’s been posted in the newspaper or online, that means the market is trending upwards. Otherwise, it’s going downwards.

Keep It Simple

A market analysis or CMA is an in-depth study that explores the data, including variables such as demographics, consumer trends, market activity, economics, competition, consumer ethnicity, and more. Market Analysis looks at the market as a whole, internal strengths and weaknesses, and the available opportunities. A market analysis can improve upon your overall marketing strategy, not to mention it can help you gain a competitive edge.

A market analysis may be required for a number of reasons:

Your boss wants to make a strategic change by rebranding your business.

You want to expand your business by opening a new storefront.

Your boss wants you to analyze the market before making a critical decision as part of your bonus checks.

In a market analysis, you don’t simply look at your competitors’ stats. You would be wise to discern whether they have both a working website and high SEO rankings, and stand a good chance of beating you out of the running. So, before you go into this type of analysis, obtain some understanding of online marketing to better understand what you’re looking for as far as SEO and marketing measurements are concerned.

Choose Comps Within 1 to 3 Miles of Your Client’s House

Data is always collected based on the area that the market is in. Follow the traditional rule of choosing comparables one to three miles radius from the property for your CMA. Using this radius will produce the most accurate comparison’s within the area of the property and will have the most relevance to your client’s home.

Deciding what is a reasonable distance to use in your CMA will depend on your industry standards in which varies from one market to another. In general, the more competitive your market, the farther you should be looking from the property.

Be mindful not to use the entire residential neighborhood for your CMA. You will almost always have wide differences between what a house in a single-family neighborhood will be worth versus a house in a duplex, triplex, etc.

Take into consideration the CMA on your client’s home will likely extend over a larger area than your CMA will due to the diversity of the neighborhood. Finding comparable properties within 1-3 miles of a given property is ideal with this in mind.

Think Like an Appraiser

A comparative market analysis compares the value of a home to similar homes in the same neighborhood, but it’s not just about the current market price. Because the head of a CMA firm doesn’t determine the price by looking at recent sales, it’s rare for the price of the report to be quite the same as the value of the home.

Additionally, the appraiser can make an accurate estimate of current market value without a lien placement. It’s estimated that more than 75% of CMA reports are completed without a lien, and that’s no surprise considering the vast majority of homes listed for sale online don’t have a realtor involved.

Because the value that appraisers calculate is the current value, rather than what they think the home will be or should be valued at … which is the price offered … it’s an estimate.

The way the appraisal professional can make a difference in how much you pay for a home consists of information that’s not available to the public. It’s an accurate analysis of the value of the property.

Frequently Asked Questions (FAQs)

What is a Comparative Market Analysis (CMA)? A Comparative Market Analysis (CMA) is a term used for several market studies that review the market value of a property. It is an attempt to estimate the market value of a property by comparing it to other similar properties nearby. A general CMA will include considerations of age, square footage, architectural features, location, and more.

How do you conduct a CMA? There are several ways you can conduct a CMA, often the chosen approach depends on the type of property you’re seeking a valuation on. Conducting a CMA on a house is a bit different than on a rental property. Here is an overview of the two most common types of CMA.

For a house, budget will often limit the number of comparables you can analyze. In this case, a roof top comparison will allow you to obtain a listing of the value of the property by examining the market value of similar listings. When looking at a house, you’re looking to determine the worth of the property based on the square footage and the condition of the interior.

What Is a CMA Report?

Comparable market analysis (CMA) is a simple way to compare the value of one property to another. A CMA report is a tool used by real estate professionals to give you a good idea of the sales and transactions going on in a certain area. The report can help you determine the desirability of a property, and determine what it might sell for, should you decide to put it up for sale.

A CMA is a valuable tool in that it gives you a snapshot of what prices have been for other comparable properties. You can use this information to determine what a property is "worth", but you should not make assumptions about the future value of property. To determine that value, you need to use a price analysis, a study of market trends and market data.

While prices will fluctuate, the price analysis will give you a good indication of the direction that prices might take. This is something that you should always take into consideration. Once you determine whether a property is worth listing or holding, you can negotiate the house price with the buyer.

The value of a property is based on three factors – It’s location, its condition, and its condition as compared to similar properties. In a CMA report, each of these factors is evaluated.

How Much Does a CMA Cost?

It’s important to understand what a property management assessment (or CMA) actually is and why you would want to incur extra costs in the process of buying a house or commercial space.

A comparative market analysis (CMA) is a comparative research study. It’s a guiding tool and similar to what a real estate agent would offer you before the purchase of a property. Finding out whether you are getting a fair deal gives you peace of mind. Take into consideration that an effective comparative market analysis doesn’t have to be expensive.

A Comparative Market Analysis can take up to a whole day to complete. It is vital to align yourself with the right services that can offer the best value for your dollar and can provide a thorough analysis customized to your property. It is important to note that your CMA should include a market evaluation, economic report, demographics, and other information, with a strong focus on what's important to you prior to visiting the property.

A well-researched CMA will provide you with answers to all your questions. In the end, it’s imperative to select the right property management assessment.

Can a Real Estate Agent Charge for a CMA?

If you are selling your house yourself, you probably already know about comparative market analysis (CMA). It’s the compilation of local home prices and the information about the neighborhood that Realtors use to help you decide whether or not to list your house.

However, can you really charge a fee to do a CMA for a fee? Can you charge just like your Realtor colleagues do?

Here’s a simple explanation of a CMA:

A CMA is the compilation of local home sale prices for a specific neighborhood in a particular area. It reflects past trends and current market conditions. Using the information in a CMA, as well as your home’s physical features, your real estate agent will be able to present you with an accurate estimate of what your property is worth in the current market.

Can you charge for a CMA?

Some real estate agents feel that a CMA is a waste of time, especially if it’s done just once for a customer. Also, some agents believe charging for a CMA is unethical. So how on earth do you charge for a CMA?

The laws in your state about charging for a CMA really depend on whether you are selling your property through a real estate agent or selling it yourself. Regardless, only licensed real estate agents can provide a CMA for a fee.

What Is the Difference Between an Appraisal & a CMA?

A financial or a real estate professional often provides an appraisal for a potential buyer. An appraisal generally involves a series of consultations and data analysis with the potential buyer. Appraisals are generally expensive and the price can escalate significantly on a situation-to-situation basis.

A comparative market analysis (CMA) is a less costly and more versatile evaluation of a house’s market worth in comparison to comparable homes. The appraisal industry has remained largely local in nature while the CMA is set on a regional or a national level. For this reason, the most relevant and reliable market information can be found on a national level.

The Bottom Line

A Comparative Market Analysis (CMA) is a comprehensive real estate market review that is used by real estate agents in Canada and around the world to analyze the property market for sale. A CMA is performed by analyzing market information specific to the market in question. It covers real estate property such as land, buildings, development sites and investment properties.

A CMA is most often used to work as part of a marketing plan. It is used to provide data to make more informed buying and selling decisions, and also provides marketing information for the realtor. CMA’s are often used to get more exposure for a property by getting their properties listed in important industry magazines and news websites.

While the exact method used for a CMA and the specific market data collected depends on the area of real estate and the broker or sales advisor performing it, each method has several methods and data used to calculate its results. A CMA may look for two or three years of data, while other areas may use the same method to look at the same area for a one year period.