What is the difference between CMA & COMPs?
I did ask hundred of a real estate agents – What is the difference between CMA & COMPs. Over 90% of those agents I ask don't have a clue and less than 10% their answer wasn't that great even. Most did have a mix concept of both issue.
Let me explain what is the difference between both (CMA & COPMs). COMPs are much more sophisticated than simple CMAs, COMPs are the best Marketing forecast, done by Marketing economists such as university professors who teach Marketing Economics.
With a glance at today’s economy, we can forecast the answer by watch the trend of the first 1-6 point and analyze point 7 and 8:
1- Consumer confidence index is it up or down
2- Business confidence index is it up or down
3- Bond yield is it up or down
4- GDP on the rise is it up or down
5- The Stock market is climbing or declining
6- Interest rate is it up or down
7- Quantitative easing: What does that mean? It is a disaster in our monetary policy where the Government prints $$$.
8- Inflation: What does that mean? The simple answer is an increase in the interest rate! And what does that mean to us as Realtors? The agent should inform sellers to sell now before prices drop.
There are many other factors related to Macroeconomics and Microeconomics if I write about here will begin to sound like a lecture in Marketing Economics – so let us stop here for now.
*** Marketing analysts can figure out the trend of the economy performance and predicate the impact on the price of almost every and any thing that are offer to be sold or bought on today market included and not limited to REAL ESTATE PROPERTIES PRICES.
Buyers:
Inform your buyers what a higher interest rate means: Mr. & Ms. Buyer will be less qualified for the same amount of loan; in plain English, buyers cannot afford the price of the property that he or she is looking at to buy at the higher rate….
An educated buyer agent should search more (work harder) to find a similar property for his buyer, it is not a bad idea to search for motivated sellers or short sales. There is a lot to say about how to deal with less qualified buyers.
Sellers:
Inform your sellers that they will have a tough time to get the price they are asking. Shortage of funds among banks means less in the money supply. Loans become more difficult to obtain, for the simple reason that the interest rate is a factor when it comes to approving mortgage loans – just study the formula of monthly income compared to the mortgage payment because lenders use your debt-to-income ratio to figure out how much of a loan payment you can handle. This monthly payment means principle and interest: the higher the interest, the less loan amount may be approved by that lender for your buyer.
Seller & Buyer Agent duty: Let both the sellers and the buyers know that the interest rate is one of the major factors that impact the speed of property transaction. Notify both parties, the less money supplied by bankers or mortgage institute or even private lenders make selling a property more challenging than before. There will be fewer qualified buyers around, thus showing your property will become harder than before. I believe you, Mr. & Ms. Seller, should re-think your property price before it is too late. As we know all buyers are affected by the interest rate. Let us work around that issue and be more flexible with their offers.
Now some should ask. How about dropping interest rates?….There is too much to write and most people don’t like to read. So if you need to know what will happen then just contact me.
Dr. Luigi Pavone (RS-79060)
Semi-retired Professor at Azteca - Inter University
First year Agent at FSBA Realty
Ph.D. In Marketing Economics
Doctor of Business Administration (DBA)
ABA, BBA, MBA, Ph.D. GRI, PSA.