How to Read a Comparative Market Analysis

What a CMA is and is not

A comparative market analysis estimates what a property is likely to sell for by looking at recent sales of similar homes nearby. It is not an appraisal, which is a formal valuation performed by a licensed appraiser, and it is not a guarantee of price. It is a reasoned estimate, and its quality depends entirely on the comparables chosen.

What makes a good comparable

• Sold recently, ideally within the last three to six months
• Located in the same neighborhood or a truly similar one
• Similar size, age, lot, and condition
• Same property type: a townhouse is not comparable to a detached home
• Arm's-length sale, not a family transfer or foreclosure

When a comparable differs from the subject property, the analysis should adjust for it. A comparable with a renovated kitchen or an extra bathroom should be adjusted downward before it is used to support the subject's value.

Questions to ask about any CMA

• Why were these particular sales chosen, and which nearby sales were left out?
• What adjustments were made and what are they based on?
• What are current active listings asking, and how long have they been sitting?
• How many of the recent sales closed below asking price?
• Does the estimate include a range or a single number?

Signs of a weak analysis

Be cautious when the comparables are far away, much larger, much newer, or more than a year old. Be equally cautious when the estimate is presented as a single precise figure with no range, or when the person presenting it has an incentive to tell you a higher number to win your listing. A useful CMA shows its work.