Realestate-ese: What is a CMA?

Oceanside Market Report


Sometimes our profession is guilty of tossing around abbreviations used commonly in the business and forgetting that those who are not licensed real estate professionals may have no clue what we are talking about.

CMA is one of those common terms.

A CMA, also known as a Comparative Market Analysis, Comparable Market Analysis or simply a Market Analysis, is an integral part of the initial phase of a real estate transaction, and perhaps the most important…determining how to position a home WELL in the current market based on the sales prices of similar homes in the nearby area (as close as possible to your home but generally not more than a mile or 2 away) typically in the last 90 days but sometimes as far back as 6 months, or further if comparable homes are hard to find.

The goal is to answer the time-honored question every home owner has…WHAT IS MY HOME WORTH?

My colleagues and I (Lori Cain, Tulsa OK; Rich Cederberg, Albuquerque NM; Bryan Robertson, Los Altos, CA) recorded a discussion we had on Goggle+ about CMAs – what they are and what they are not, what information do we use, how they are used, and other important issues. Take a look.

Keep in mind that a CMA is looking backwards, at what HAS sold, and is only a snap shot in time. As the market shifts (inventory goes up or down, buyer demand changes), additional CMAs must be done to be sure the home is properly priced.

The more similar the comparables, the better – a model match with the same floor plan and square footage is best but not always available, or the home may be a unique property. We also look at the amenities and upgrades as compared to your home since they will impact market value.

Another piece of the CMA is looking at how long it takes homes to sell and how much inventory there is to be absorbed by the current rate of sales. 6 months of inventory is a balance market between supply and demand.

A CMA is both science, based on data, and art – understanding the impact of all the factors that impact the market. A well done CMA will be pretty accurate, depending on the comparable properties that have sold in the area, even though the information may NOT be what you want to hear about your home’s value.

However, we won’t know for sure how accurate the CMA is until we are on the market – the market will then tell US if we are right or not by lots of showings and an offer (or more than one). Remember, the MARKET will tell us what the value of your home truly is, not what YOU want it to be. And it’s only good at a certain point in time – changing market conditions can impact the value of your home.