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What is a Comparative Market Analysis, and What Does It Look Like?

We’ll walk you through a Comparative Market Analysis (CMA), explaining what it is, what it looks like, and why it’s so important when selling your home. —-

Pricing your home right can be a daunting task in the ever-changing landscape of real estate comps — recently sold comparable properties. In order to get the most thorough, detailed, accurate valuation of your home, consider a comparative market analysis, or CMA.

If you’re not familiar with this invaluable tool or don’t understand its components, we’re here to help. We have incorporated exhaustive research and expert input from Carl Medford, a seller’s agent who ranks in the top 1% in the San Francisco Bay area, to explain what a CMA is and why it’s such an essential element in a seller’s strategy. He’s even brought along a CMA example to enhance the explanation with visuals.

Source: (Kzenon / Shutterstock)

What is a comparative market analysis (CMA)?

A comparative market analysis is a gauge that real estate agents use to calculate the value of a home by evaluating its features, size, location, age, and other details in relation to similar properties that have recently sold. Its primary purpose is to compare a property against nearby recently sold comps in order to determine an appropriate listing price (or bidding price).

Considered the single-most important tool in assessing a home’s market value, the typical CMA comprises around 30 to 50 pages of data, charts, photos, and facts that form the basis of an unbiased opinion of a home’s market value.

But a CMA is more than that. A balance of art and science, it relies on factual data such as square footage, age, and location. However, a well-executed CMA also incorporates subjective characteristics like upgrades, neighborhood, and features.

A real estate agent or broker usually compiles information gathered from the multiple listing service (MLS), photos of the property, inventory levels, and other market indicators. Some agents, like Medford, turn to industry software like Cloud CMA in order to add greater detail to the results.

How is a comparative market analysis different from a comp?

The two terms are similar and are sometimes, mistakenly, used interchangeably. But there are subtle differences that are important to understand.

A comp, or comparable sale, is “an individual property that is similar to the one being sold,” Medford says. The comp should be located nearby – ideally, within the same neighborhood or subdivision, Medford explains – and be a recent “sold” home – typically within the past three to six months. Similarities should include, size, age, condition, location, and features.

A CMA is an analysis of numerous comps (Medford likes to use 10) used to establish a median price, with an evaluation of how they compare to the property in question.

Source: (Ave Calvar / Unsplash)

How is a real estate CMA different from an appraisal?

A CMA is so similar to an appraisal, it is sometimes considered an “informal appraisal.” While the two use many of the same sources of information, they differ in purpose and preparer.

A real estate agent creates a CMA for a seller in order to help determine the correct listing price. Buyers may also use a CMA to inform their bidding. There is generally no separate charge for a CMA; rather, it is included in an agent’s commission.

A certified or licensed appraiser conducts an appraisal of a property, usually at the behest of the buyer’s lender in order to ensure that the property is valued at or more than the loan amount requested. The appraiser will examine your home in person to record details about size, square footage, finishes, features, condition, and more. The appraiser will then compare that information to property tax records, recent comps, sold data from the MLS, and sales trends to establish if sales are on the rise or fall. 

The appraiser has no vested interest in the property or its sale. The buyer pays for an appraisal – customarily about $300 to $400. Some sellers will also decide to pay for their own pre-listing appraisal.

Medford points out that while an appraisal generally uses only three comps (as opposed to 10 in a typical CMA), the appraiser does a “deeper dive” to establish an immediate value. He acknowledges that banks usually view appraisals as more valuable than a CMA, even if many of his colleagues disagree.

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How is a comparative market analysis put together?

A CMA consists of several steps and extensive information. In order to create a comprehensive and accurate CMA, a real estate agent must perform these actions:

1. Gather details about the property that will impact its value. This may necessitate a visit to the property in order to collect key information such as:

Address, community, neighborhood
Square footage
Number of stories
Property photos
Age
Style
Number of bedrooms and bathrooms
Location
Accessibility and parking
Type of flooring
Type of foundation
Condition
Lot size
Landscaping and hardscaping
Curb appeal
Type of heating, ventilation, and air conditioning (HVAC) system
Roofing
Any renovations and upgrades
Features such as garage, finished basement, views, pool, fencing, security system, finishes, etc.
Neighborhood, including amenities, HOA, school district, and any nuisances
Sales history and value adjustments over the years

2. Select comps that are as similar to the property as possible, within a close radius that have sold recently. Medford likes to stay within a half-mile in the San Francisco area, but agents in other areas are content with a one-mile radius in most urban settings. Agents should include itemized lists of each property similar to the list prepared for the sale property. Including a map helps.

3. Adjust for differences between the sale property and the comps by assigning a dollar value to each line item and adjust the value of the comp accordingly. By dividing the adjusted price of each comp by its square footage, determine the sold price per square foot. Adding the price per square foot of all the comps and dividing by the number of comps provides the average price per square foot.

4. Evaluate market trends that indicate pricing fluctuations in various nearby neighborhoods and provide the median listing price, days on market, estimated value, and sale price. Additional trends to list could include:

List price vs. sales price
Average price adjustments
Median home value vs. median listing price
Median listing price vs. listing volume
Median sale price by square footage
Price range of homes sold
Age range of homes sold

For other ideas of what to look for in a CMA, and visual examples of a CMA, read on.

What makes up a good comparative market analysis?

A comparative market analysis is only as good as the comparable sales chosen. While there is no perfect comp, a good CMA will contain many of these elements:

Location – For most urban properties, a one-mile radius is preferred, although not specifically required. However, the closer the better: same neighborhood, same school district, same zip code. Location also includes factors like busy roads, nearby commercial property or railroads, parks, retail, and other attractions or detractions.

Date of sale – Sales from the previous three to six months are preferred, although the date range can be extended, particularly for rural or unique properties that have few comps. There may be other reasons to go back further, says Medford. Location trumps sale date, so it’s better to compare similarly located properties than to introduce ones that aren’t quite in the right neighborhood.

Lot size – Properties should be as close in lot size as possible – ideally, within 300 square feet.

Number of bedrooms and bathrooms – It’s difficult to compare homes that don’t have the same number of bedrooms or bathrooms, as these are critical aspects a buyer searches for. However, bedroom and bathroom count is less important than square footage, Medford says. He has seen a three-bedroom home sell for more than a four-bedroom home with less square footage in the San Francisco Bay area.

Square footage of the comp home – Like lot size, size of the home, as indicated by square footage, makes for a more equitable comparison. A good CMA should compare your home to others that are within 100 to 200 square feet in size. Square footage is important because relying only on the number of bedrooms isn’t accurate enough. Room sizes may vary significantly, and additional rooms, such as a home office, may be included.

Age and condition of property – Age is often thought to be an indicator of a home’s condition – and the expected amount of work, repairs, or renovations it may require. However, a home of any age can be in good or poor condition, so these factors must be noted.

Special features – Features such as a fireplace, swimming pool, accessory dwelling unit (ADU) such as a mother-in-law suite, or basement can add value to a home.

Extra features or upgrades – If appliances have been upgraded, if a new roof or HVAC unit was installed, or if new flooring was recently laid, the home should reflect increased value. Because a CMA is an art and a science, it’s important to have your CMA note the extra features of a home that an automated online home valuation estimator might miss. An updated kitchen, renovated bathrooms, and professional landscaping all can drive the price of a home and should be accounted for in a good CMA.

Terms of the sale and financing – In a buyer’s market, a seller might be willing to buy down points or agree to an assumable loan in order to complete the deal. However, Medford says in the current seller’s market, this is not an issue.

Interior photos of comparable sales – A picture is worth a thousand words. Good photos are critical in accurately portraying size, condition, and features of a comp. A good CMA will include interior pictures that help inform what drove the sale price of the home. A poorly done CMA may only include exterior photos, which Medford says are “completely useless.” This is one reason he likes to use Cloud CMA, which includes the interior photos from the MLS listing. “A standard CMA has only front-of-the-house photos. A Cloud CMA helps the buyer see more detail.”

Here is a comparative market analysis example

In this simulated CMA, the agent has pulled comparable properties within a certain neighborhood.                      (Source: Keller Williams Benchmark Properties)

Medford begins his CMA with a map to help sellers visualize the proximity of the chosen comps to their property. He prefers to stay within a half-mile of the property when selecting comps, and adds that it’s important to pull from the same type of neighborhood. Because new construction subdivisions can arise next to established neighborhoods, that’s an important difference to note.

Because sale price doesn’t always equate to list price, it’s important to select sold properties as comps, which are duly designated by an “S” or “Sold” tag in the CMA. Using sold properties for comps “helps the buyer’s agent know how to bid,” Medford notes.

“The map shows where it is,” Medford explains. “The summary shows when it is.” In his fast-moving market, he prefers to select properties that sold no more than three months prior, but when it’s difficult to find comps or the market is slower, he’ll use properties that sold as much as six months earlier. He considers solds that are one year old “meaningless” because market conditions change too much in that long of a period.

That said, Medford re-emphasizes  that location trumps sale date, so it’s better to compare similarly located properties than to include ones that aren’t in the right neighborhood.

The summary provides a quick glimpse of how many bedrooms and bathrooms each property has, the square footage, and the price, enabling an easy comparison.

As mentioned above, a good CMA should compare your home to others that are within 100 to 200 square feet in size. Medford says square footage is more important than the number of bedrooms.

The age of the home can be a factor in pricing strategy because of the perception that older homes may be in need of more work and updates. These fears can be allayed by noting all upgrades, updates, and renovations done to the property.

In addition, the number of days on market (DOM) can be a silent signal that the pricing wasn’t right. In the hot San Francisco market, Medford says he could sell some homes within hours, but he deliberately keeps properties on the market for one week in order to allow time to field offers. Nevertheless, he says that DOM is “critical” in pricing and in bidding. ​​A solid comp property sale should typically close within a reasonable number of days on market.

As we’ve noted, a picture is worth a thousand words. This is where the art meets the science of a CMA.

People may skim details in the written description, but photos of the property usually catch their eye – and their interest.

Driving by shows off the curb appeal, but photos entice a buyer to come see a property in person. Photos reveal things an automated home valuation might miss: renovated kitchens and baths, upgrades, and views.

Staging the home for photos helps buyers envision themselves living in the home. Furnished rooms can sometimes look larger – or at least their purpose more defined – than empty rooms.

Photos of the yard, its landscaping, and amenities can really sell a home.

A really clever CMA will include aerial views of the property to indicate its surroundings, nearby neighborhood attractions (such as a park), and photos of the view if it’s impressive.

A quick synopsis comparing the listing price versus sale price, as well as the percentage of the list price each home sold for really lays it out for a seller.

Including the per-square-foot price is a good way to help a seller understand the basis for pricing of their own home.

The summation of all the data from the earlier pages comes down to the agent’s recommendation of the range (in dollars and in dollars-per-square-foot) for pricing the seller’s home. Including the average price range of the comps helps sellers realize where their homes should be priced.

Can I perform my own comparative market analysis?

Homeowners can perform their own CMA, but are unlikely to be able to do as complete a job as a real estate agent can because some of the data an agent collects is not readily available to the average homeowner.

Using an automated valuation model (AVM) is not foolproof, no matter how reputable the online estimator tool. In fact, Medford likes to include an analysis of several AVMs in his CMAs just to show sellers how far off they can be.

AVMs use mathematical modeling to access recent comps and other public data in order to calculate estimated property value. However, although they use some of the same data as an appraiser or tax assessor, they won’t contain all the detail or analysis a real estate agent can provide in a CMA. 

Nevertheless, for a general idea of your home’s value, a good starting point can be found with HomeLight’s Home Value Estimator. Simply enter your address and answer a few basic questions about your home to get a preliminary home valuation in under two minutes.

What mistakes can happen in a CMA?

Homeowners who produce their own CMAs often lack access to valuable information, but there are other things that can go wrong with a CMA, even if a real estate agent does the work.

Poorly selected comps – Cherry-picking comps that aren’t genuinely a good match can influence a homeowner to overprice their property, resulting in lagging offers, price reductions, and extended days on market. Comps that are too far away, not recent solds, don’t reflect similar features or upgrades, or otherwise bad matches won’t provide a constructive CMA. “Sometimes, rookies fail to differentiate between types of properties,” Medford observes. You can’t compare a single family home to a townhome, for example.

Comps didn’t account for new construction vs. older homes – New developments can arise next to established neighborhoods. If Medford isn’t familiar with the area, he looks it up on Google’s satellite views so he can see the property from the air. “I look at the roof to distinguish new construction versus old.”

Poorly defined neighborhood – One common mistake is drawing a perfect circle radius around your home. It’s not always the most accurate approach. “If you go across a busy street, a set of railroad tracks, [or] a creek, everything can change,” Medford says.

A top agent will know your neighborhood and the market trends. This knowledge enables an experienced agent to produce an accurate CMA. An agent is a “coach, a guide, a mentor,” Medford says. An experienced agent knows if the market is increasing or decreasing and will help a seller stay ahead of it by pricing accordingly.

If you don’t have a real estate agent, you can find one with the help of HomeLight’s Agent Match. This free service analyzes millions of home sales to find the top agents who sell faster and for more money. Our data indicates that the top 5% of real estate agents in the U.S. sell homes for as much as 10% more than the average real estate agent.

Source: (Jan Tinneberg / Unsplash)

Bottom line: A good CMA helps open the door to a successful home sale

A good CMA can aid in the correct pricing of your home for sale. Pricing your home correctly can speed its sale by attracting buyers searching within your home’s specific parameters.

A top agent can prepare a thorough, documented CMA that will assist in setting the right listing price to reflect market conditions. But remember, Medford cautions, a CMA is a starting point to help determine pricing strategy; it is not the real value of your home.

A CMA should include:

Good comps
Square footage
Age and condition
Number of bedrooms and bathrooms
Location
Any renovations, features, and upgrades
Neighborhood details
Sales history and value adjustments over the years

As many as 95% of buyers used online tools in their home search process, with 41% of recent buyers confirming that the first step in their home search was to look online. “If they see that your price is out of line, they’re not going to bother to come because they’re just going to conclude that the seller is unreasonable,” Medford warns. “They’ll go somewhere else, even if the house is drop-dead gorgeous.”

If you price it 10% to 15% below market value, that opens up the potential buyer pool to 75% to 90%, according to the pricing pyramid. Medford has observed this pricing strategy implemented in Oakland Hills, where some real estate agents underprice homes to attract a bigger pool of buyers with the ultimate goal of driving up the sale price through bidding wars.

If you price your home right, it will sell. According to NAR’s 2021 Profile of Home Buyers and Sellers, most buyers purchased their homes for 100% of the asking price (with 29% purchasing for more than the asking price).

Whether you price it at or below market value, a CMA gives you the information you need to price it right.

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