A GUIDE ON CONDUCTING A COMPARATIVE MARKET ANALYSIS FOR SELLERS

You may know that coming up with a selling price for your home is more than just sticking the price you want on the house. An overpriced home can sit on the market for a very long time, creating more maintenance issues, developing blight and ultimately becoming a stale listing. This can lower the value even more than pricing correctly from the start. An underpriced house, on the other hand, shortens the days on the market, but you may not be getting your money’s worth. If you want to properly sell your house, you need to find out its fair market value. This can be done by running a comparative market analysis (CMA).

A CMA uses real estate comparable sales, or comps. This is all about comparing your property to other similar houses in the area and determining a baseline price. Everything from the size, location, condition, number of rooms and other features are considered. Common ways to find comps, are with a home appraisal or by checking property listings.

Appraisal

This is an unbiased professional report by a third-party appraiser on a property’s market value. The appraisal report is more involved than a CMA, but can cost a few hundred dollars. Eventually, when you accept an offer, if the buyer is financing the purchase with a mortgage, an appraisal will need to be completed, but at the buyer’s cost. When you are first looking to list your house for sale, a CMA will review, and provide you with the information you need to determine an appropriate selling price.

Property listings

There are several types of property listings shown in a standard CMA report, including:

• Active listings

These are properties that are currently on the market for sale. These listings serve as your competition for buyers. You can see the list price, and how long it's been listed.

• Pending listings

These are properties where an offer was accepted, but has not closed yet. While you will not know the actual sales price, until the property closes, it can give an idea of the market, by seeing how long the property was on the market, and at what listed price.

• Sold listings

These are properties that actually sold. You can see the actual sold price, how long it was on the market and if any seller concessions were given to the buyer. You can search to see how many sold within a certain time period, in your neighborhood. The most recent sales, and the ones closest to your home, are the best comps. This is what you’re after, so your CMA shows the price value range you should expect to sell your house.

After gathering all the data you need, including the real estate comps in your area, it’s time to do a bit of calculations for the CMA. You need to get the price per square foot which is taking the sold price of a property and divide it by its square footage. Repeat this for all of the comps you’ve listed and come up with the average based on the price per square foot for each property. To make things easier, let’s provide an example:

Property 1: $120,000; 1200 sq ft

Price per sq ft = 120,000 / 1200

= $100/sq ft

Property 2: $115,000; 1,100 sq ft

Price per sq ft = 110,000 / 1,100

= $105/sq ft

Property 3: $117,000; 1,300 sq ft

Price per sq ft = 117,000 / 1,300

= $90/sq ft

Average price per sq ft = (100 + 105 + 90) / 3

= $98

In the example above, we can see that the average price per square foot is $98. This means that properties that are above the value of $98 are higher than the average market price.

The next step is coming up with a starting price for your property. You simply need to get the square footage of your property and multiply it by the average price per sq foot. For example, if your property is around 1,150 sq ft, the estimated value would be $112,700. This gives you a good starting point on where to price your house, but is that all you need?

To come up with an effective CMA, you need to find properties that share the same features with your property. Focus on sold listings that are the most recent, within your neighborhood, or surrounding area. These are just some of the steps to ensure you make the smart investment decisions. For every seller, knowing the value of their property is very important.

Completing a comparative market analysis is just the beginning to establishing your home’s value. Other factors include: how does the condition of your house compare with the comps; is your house in better, or worse condition than the comps; do you need to sell fast, or can you afford to have the sale take longer; do you have unique features which add value, or lacking features the comps have; your location. These are some other factors to consider when pricing your house for sale.

Knowing the comparable market values, will give you a competitive advantage when pricing your home for sale. Knowing the sold comp prices, and the current list prices, will allow you to strategically price your home. Working with a professional will assist you in getting this information, and understanding how to use it. The professionals at SellUsHomes will do all the needed comps, and valuations for you, should you decide to sell your property to us. We offer direct buying which effectively eliminates the need of you paying fees to agents. You get the money for your property without the deductions. Contact us now by phone at (734) 224-5947 or email [email protected] to get started.