Key takeaways

• A comparative market analysis, or CMA, helps estimate a home's value by comparing it with similar nearby properties that are for sale, under contract or recently sold, giving sellers a data-driven listing price and buyers a basis for competitive offers. 
• Sellers should verify a market analysis by checking whether the comparable homes match on square footage, lot size, condition, financing type and sale timing, because small differences in these factors can shift the valuation significantly. 
• A market analysis is not the same as an appraisal. Agents prepare market analyses to recommend a listing price, while licensed appraisers perform formal valuations that lenders require before approving a mortgage. 

A comparative market analysis, or 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 comparable market analysis, also often referred to as a comp, 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. Getting that price right matters: too high, and buyers pass over the listing; too low, and the seller leaves money on the table.

A comp is a data-driven report that real estate agents use to estimate a home's fair market value. It compares the property with similar homes that are currently for sale, under contract or recently sold in the same area. Sellers rely on a comparative market analysis report to choose a realistic listing price, while buyers may use it to gauge whether an asking price is reasonable and how much to offer.

A typical comparative market analysis report looks at factors such as location, property type, size, age, condition, layout and amenities. Most analyses focus on comparable homes within about a one- to two-mile radius, depending on the market.

Unlike a comparative market analysis report, a home appraisal is completed by a licensed appraiser and is usually required by lenders to approve a mortgage.

By reviewing active listings, pending sales and recent closings, a comparative market analysis report offers a snapshot of current market conditions and what buyers are actually paying for similar homes.

"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," said Barbara Mount, a real estate agent at Premiere Property Group in Portland, Oregon.

Appraisers rely on similar data, so pricing a home using a comparative market analysis report can reduce the risk of a deal falling apart later.

"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 said.

Buyers can also use a comparative market analysis report to help them determine a fair and competitive offer.

While formats vary by agent and brokerage, most market analyses compare between three and 10 similar properties. Reports generally include:

• Details about the subject property, such as address, home type, square footage, lot size, exterior materials, year built, and number of bedrooms and bathrooms. 
• Information on comparable properties, including list prices, sale prices, close dates and time on the market. 
• A recommended listing price or price range based on market data and agent analysis. 

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 makes 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 said.

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.

Related content:

• Preparing for an appraisal: Tips to boost your home value 
• How to price your home to sell 
• What determines property value? 
• Selling a home in 10 steps 

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 comparative market analysis 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," said 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 comparative market analysis follows a structured process designed to produce an accurate and reliable price estimate.

A real estate agent begins by defining the market area, typically by identifying relevant neighborhoods or subdivisions. The agent then gathers data on recent sales, active listings and pending transactions within that area. Sources often include public records and multiple listing service data.

Mount explained most brokerages use specialized platforms that pull in large amounts of market information. These systems analyze data such as price per square foot and average days on the market for new, pending and sold homes.

"Information is gathered through a thorough search for comparable homes and is then input into the program," she said. "Then the agent and seller will fine tune."

Once the data is collected, the agent analyzes the sale prices of comparable homes and adjusts them to better reflect the value of the seller's property. This step accounts for differences in size, layout, age, condition, location, upgrades and amenities. Adjustments help create a more accurate comparison between the subject property and the comps, leading to a more reliable estimate of value.

The process also requires an understanding of local market trends 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 said. "That combination should allow you to arrive at a price that will help sell the property within several weeks."

After the comparable homes are entered and adjusted, the system generates a valuation range for the agent to work with.

"There are typically three numbers that are given: a low, mid and high range," Mount said. "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 interested in estimating a home's value can also generate a home value estimate on Homes.com.

Few homes are exactly alike, so a good comp considers and adjusts for the factors that distinguish one property from another. Once you receive your agent's report, it is worth taking the time to verify the calculations. The following questions can help you check whether the comparable properties and sales data are a fair match.

Make sure the homes in the report are as much alike as possible. If they weren't alike, check what sort of adjustments went into the calculations.

• Do the homes being compared have similar square footages, and if not, how were the differences accounted for? 
• Are the homes in the same neighborhood? If there aren't enough in the area, were homes from an area with the same quality of schools, crime rate, noise levels and walkability used? 
• Are the lot sizes comparable? If not, was the square-foot value of a comparable lot accurate? 
• Are the ages of the homes similar? 
• Did the agent adjust for any renovations made to the properties? 
• Did the agent adjust for the condition of the homes? 
• Do the properties have the same number of bedrooms and bathrooms? If not, was the adjustment for an extra bedroom or bathroom accurate? 
• Are there any special features accounted for, such as fireplaces, patios, garages and finished basements? 
• Did the agent document the cost of adjustments in the analysis? 

Pro tip: A comparative market analysis contains a lot of data and uses complicated mathematical calculations. If you don't know any real estate professionals who can check the work, it's a good idea to call your municipality's planning commission to see if they can help.

Look for recent sales using similar financing and adjustments to sales price.

• Were the comparable homes sold in the last three to six months? 
• If not, were sales prices adjusted for changes in the market such as higher interest rates or more inventory? 
• Did the buyers of the comparable homes use similar financing? 
• Did the sellers of comparable homes make any concessions to the buyer? If so, does the report consider their impact on value? 
• Did the agent adjust for the time of year sellers sold the homes, knowing that sales are often highest prior to the start of a school year? 

Pro tip: An agent who has experience selling homes in a particular neighborhood is more likely to be attuned to differences between it and other neighborhoods.

A comparative market analysis is a pricing tool used by real estate agents to help determine an appropriate listing price based on comparable properties and current market data. A home appraisal, by contrast, is a formal valuation typically required by lenders. It is performed by a licensed appraiser to confirm that a home's sale price aligns with its market value.

Appraisals are commonly used to protect buyers from overpaying when an appraisal contingency is in place. Lenders rely on them to approve financing, and they may also be required for insurance, estate planning or other financial purposes.