What Is a Comparative Market Analysis (CMA) in Real Estate?

A comparative market analysis (CMA) is a report that provides a data-driven evaluation of a home's value in relation to similar properties in the same market. The primary purpose of a CMA is to give the seller an understanding of a property's fair market value. This helps them make an informed decision when they price and sell their home.

• A comparative market analysis is a tool that real estate agents use to estimate the price of a home based on other comparable properties in the area. 
• Home sellers will use a CMA to determine the best listing price, while buyers may use them to determine a competitive offer.
• A home’s age, amenities, condition, location, size and style all factor into the analysis.

By analyzing active listings, pending sales and recently sold properties, a comparative market analysis provides insight about the current market conditions and how they will impact a property's value.

“All sellers (and buyers, for that matter), should insist on a CMA in order to ensure their agent is pricing their home favorably based on market trends and the local real estate market,” says Barbara Mount, a real estate agent in Portland, Oregon. 

“Because an appraiser will eventually use a similar analysis to value your home, letting your real estate professional create a CMA means that the transaction won’t fall through because your home was priced too high,” Mount says. Buyers can also use a CMA to help them determine a fair and competitive offer.

Conducting a comparative market analysis requires an understanding of current real estate market conditions. This includes researching comparable properties and recent sales data. 

In general, the comparative market analysis that you receive from your real estate agent will include:

• Details on the subject property, including the address, home type, size, year built, and the number of bedrooms and bathrooms. 
• Information on comparable properties (comps), such as list prices, sale prices, close dates and the number of days on the market. 
• A recommended listing price or price range, based on the real estate agent’s analysis of comps and market conditions.

The first step in a comparative market analysis is finding comparable properties (comps) with the home that will be listed for sale. According to Mount, the criteria that make a home a comp includes:

• Location: Proximity to the subject property. It should ideally be in the same neighborhood and school district.
• Property type: The comps should be the same type of property, such as a single-family home, condo or townhouse.
• Size and layout: The homes compared should have a similar square footage, with the same number of bedrooms and bathrooms. The homes should also have a similar style, layout and lot size.
• Age and condition: All properties should be of a comparable age and condition, ideally with a similar level of updates or renovations.
• Amenities: Comparable properties should have similar features and amenities.

“We prefer to look within a one- to two-mile radius of your property, unless it’s rural or there are other constraints, like it’s an older home near a brand-new development,” Mount says.
After comps are found, the agent goes through a screening process to determine which homes, whether active, pending or sold, can be used to determine a list price for your home.

Of course, sometimes it’s not possible to find an identical house for comparison. Your agent will weigh each comp based on its relevance and similarity. Then, they’ll adjust the price based on the differences. For example, you may be able to price your home higher if it has four bedrooms but recently sold comps only have three.

It’s critical to consider only the most recent sales data in a comparative market analysis. Sales data from years ago (and even several months ago) may not accurately represent the present market.

Recent sales data provides insight into what buyers are willing to pay for similar properties. This gives you a more accurate estimate of the property's value and the features to emphasize in your listing.

Market conditions play a significant role in determining a property's value. A thorough CMA must consider the impact of factors such as supply, demand and seasonality. Economic trends, like the local economy and employment rates, can also be a factor.

“A key one to watch is the fluctuation in interest rates,” says Mount. “A home that four years ago would have sold for $800,000 in the whirlwind of COVID could be $100,000 less today simply because fewer homes have sold due to high rates. This can really hit hard when sellers see an accurate comp for pricing.”

Conducting a CMA involves a systematic approach to ensure accuracy and reliability. The following steps outline the CMA process.

Your real estate agent will identify the geographic boundaries of the market area by determining the relevant neighborhoods and subdivisions. That’s where they will focus their efforts to collect information on recent sales (comps), active listings and pending sales. The sources for this information can include public records and multiple listing service (MLS) data.

Mount says that most agencies have a platform that incorporates a vast amount of data to create a CMA. It can include everything from price-per-square-foot to average days on market for all new, pending and sold properties. “Information is gathered through a thorough search for comparable homes and is then input into the program,” she explains. “Then the agent and seller will fine tune.”

The next step is to analyze the sale prices to accurately reflect the value of the seller’s home. This process involves identifying differences to make price adjustments to each comp's sale price. Your real estate agent will consider factors like property size and layout, as well as age, condition, location and any upgrades or amenities. 

These adjustments will result in a more accurate comparison between the comps and the subject property. This ultimately leads to a reliable estimated value and requires an understanding of local market trends, property characteristics and buyer preferences.

“To some degree, analyzing and creating the sweet spot for an asking price is some analytics, which is created by the program, supplemented with old-fashioned instinct based on what an experienced agent knows about the property, the surrounding neighborhoods and the current market trends,” Mount says. “That combination should allow you to arrive at a price that will help sell the property within several weeks.”

After all the comparable homes are input, the program will offer a valuation that gives the agent a price range to work with. “There are typically three numbers that are given: a low, mid and high range,” Mount says. “That’s why we need to balance all those numbers carefully, work closely with the sellers and come up with a final price that everyone feels comfortable with.”

Buyers who want to check the value of a property can generate a home valuation report to find the estimated value of any listing on Homes.com. This estimate analyzes data from four trusted valuation models: Collateral Analytics, ICE Mortgage Technology, First American Data & Analytics and Quantarium.

A comparative market analysis is a real estate agent's tool to determine a home’s listing price based on market data and comparable properties. 

A professional home appraisal is typically used for lending purposes, as well as instances where a more formal, detailed and objective analysis is required. It is performed by a licensed appraiser to ensure that the sale price aligns with the market value of the home.   

An appraisal can be used to make sure that a buyer does not overpay if an appraisal contingency is in place. Lenders frequently use a home appraisal to approve financing on a home purchase. An appraisal can also be used for insurance or estate planning purposes.

An accurate CMA report is essential for pricing because it provides a reliable benchmark for determining a property's value, helping sellers set realistic prices and buyers make informed offers. Pricing a property too high can lead to prolonged market time and potentially even costly price reductions, while pricing it too low can result in leaving money on the table.

By working with a reputable real estate professional who’s acquainted with your local market, you’ll be able to determine the right price when you list your home for sale.