Comparative Market Analysis (CMA) is a crucial tool in the U.S. real estate sector, especially when considering property purchases. This analysis provides an accurate estimate of a property’s value. Thus, it compares with similar ones that have been recently sold in the same area.

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What is Comparative Market Analysis?

This analysis (CMA) is an essential tool used by professionals in the real estate sector. It is used to estimate the value of a property. All based on comparison with similar properties that have recently been sold in the same area.

The importance of this analysis

Here are some reasons for its importance:

  • Set competitive prices: The CMA is crucial. It helps sellers set a selling price that is competitive in today’s market. This maximizes the chances of selling.
  • Avoid overpricing or underpricing: By using a CMA, you ensure that the property is not overvalued or undervalued. An incorrect valuation can significantly affect how long the property stays on the market.
  • Facilitates negotiations: A CMA provides a solid and justified basis for negotiation. Buyers and sellers can refer to objective data from the current market to support their positions.

How to do the analysis properly?

To perform a CMA, several key steps must be done:

  • Selection of comparables: The agent identifies similar properties, also known as “comparables,” that have been sold in the past few months.
  • Adjustments: Since not all properties are identical, adjustments are made to cut the differences. For example, if the property being assessed has a pool and the comparable one does not, the value is adjusted.
  • Market Analysis: Local market information is examined to understand current trends. They can affect property values and, if you don’t know them, cause investment risks.
  • Data compilation and analysis: The agent compiles all data and adjustments. Thus, an estimate of the market value of the assessed property is formed. This is presented in a detailed report.

Key factors

Conducting a CMA involves knowing these factors:

  • Property Location: A home in a desirable area with good access to amenities and public transportation will generally have a higher value.
  • Property characteristics: This includes the size of the lot, the built area, the number and size of the rooms, among others.
  • Condition of the property: that is, the general condition of the property, the renovations carried out and its maintenance.
  • Recent comparables: The sale prices of similar properties in the area that have recently sold.
  • Market trends: Factors such as the U.S. economy, interest rates, employment, and other macroeconomic indicators can influence the value.
  • Demand and supply in the area: The number of properties available compared to demand can affect the value of a property.

Differences Between a Comparative Market Analysis and Appraisal

Comparative Market Analysis

Although both CMA and appraisal seek to determine the value of a property, they differ in their approach and use. Appraisal is a more formal process. Generally, required by financial institutions to approve mortgage financing. It is performed by a professional appraiser and may consider aspects that are not always present in a CMA.

On the other hand, the CMA is less formal and is mainly used by real estate agents to set the sale or purchase price of a property based on the current market.

Understanding and using comparative market analysis is essential for any investor or buyer in the real estate market. If you’re thinking about investing in Miami, a CMA can provide you with the confidence. We invite you to contact PFS Realty for more information about real estate in Florida. We’ll help you through the process!

References

Idealista (2023, June 6). Comparative Market Analysis (MCA). https://www.idealista.com/tools/centrodeayuda/articulos/analisis-comparativo-de-mercado-acm/

Ortega, C. (n.d.). Comparative analysis: What it is and how it is performed. QuestionPro. https://www.questionpro.com/blog/es/analisis-comparativo/

Propital (2021, July 5). How to do an ACMI or comparative analysis of the real estate market. https://ww2.propital.com/blog/analisis-comparativo-mercado-inmobiliario