Comparative Market Analysis (CMA)

January 1, 1 6 min read Comparative Market Analysis CMA Real Estate Valuation Broker Price Opinion Property Value Estimation Real Estate Selling Listing Prices
An estimate of the value of property using select indicators from sales of comparable properties, usually provided by a broker or salesperson, to help clients set listing and selling prices.
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Comparative Market Analysis (CMA)

Definition

A Comparative Market Analysis (CMA) is an estimate of the value of a property using select indicators from the sales of comparable properties. This analysis is provided by a broker or salesperson to help clients set realistic listing and selling prices. It is important to note that a CMA is not an official appraisal and does not meet the standards defined by the Uniform Standards of Professional Appraisal Practice (USPAP).

Importance

Real estate brokers and agents, who are not state-certified appraisers, are often not permitted to perform appraisals in most states. Instead, they use a CMA to estimate the value of a subject property. This method allows them to assist their clients in setting listing prices and negotiating selling prices.

Examples

  1. Residential Sale: A broker performing a CMA for a two-bedroom apartment might look at recent sales of similar two-bedroom apartments within the same neighborhood to determine a suggested listing price.
  2. Commercial Property: For a commercial property, such as a retail store, a CMA would include the analysis of recent sales of similar commercial properties in the local market.
  3. Vacant Land: An agent could perform a CMA for a piece of vacant land by evaluating recent sales of other vacant lands in the same area with similar zoning and utility access.

Frequently Asked Questions

1. What factors are considered in a CMA?

  • A CMA typically includes factors such as recent sales prices of similar properties, square footage, location, number of rooms, and property condition.

2. How accurate is a CMA?

  • A CMA provides an estimate based on available market data and comparable properties. While not as precise as a formal appraisal, it is generally a good starting point for price-setting in real estate transactions.

3. How often should a CMA be updated?

  • Given fluctuations in the real estate market, a CMA should be updated whenever significant changes in the market occur, or when the property has undergone significant improvement or deterioration.

4. Can a CMA be used for mortgage lending?

  • No, lenders require a formal appraisal conducted by a state-certified appraiser, not a CMA.
  • Appraisal: An official valuation of property conducted by a certified appraiser, following USPAP standards.
  • Broker’s Opinion of Value (BOV): Similar to a CMA, a BOV provides an estimate of a property’s value from a broker’s perspective based on comparable sales.
  • Fair Market Value (FMV): The price at which property would sell under normal market conditions between willing parties.
  • Listing Price: The price at which a property is advertised for sale.
  • Market Value: The estimated amount for which a property should exchange on the date of valuation.

Online Resources

References

Suggested Books for Further Studies

  • Real Estate Market Valuation and Analysis by Joshua Kahr and Michael C. Thomsett
  • The Appraisal of Real Estate by Appraisal Institute
  • Modern Real Estate Practice by Fillmore Galaty, Dearborn Real Estate Education

Real Estate Basics: Comparative Market Analysis (CMA) Fundamentals Quiz

### What is a Comparative Market Analysis (CMA) primarily used for in real estate? - [x] To help real estate brokers set listing prices for properties. - [ ] To determine tax-assessed value for properties. - [ ] To offer legally binding property appraisals. - [ ] To confirm loan eligibility. > **Explanation:** A CMA helps real estate brokers and agents set listing and selling prices for properties based on the analysis of comparable sales data. ### Which professional commonly prepares a Comparative Market Analysis? - [x] A real estate broker or salesperson - [ ] A state-certified appraiser - [ ] A mortgage lender - [ ] A real estate attorney > **Explanation:** A CMA is typically prepared by a real estate broker or salesperson, who analyses recent sales data of similar properties for valuation estimates. ### Is a CMA the same as an official property appraisal? - [ ] Yes, they are the same. - [ ] Yes, but only in certain states. - [x] No, they serve different purposes. - [ ] No, a CMA needs certification. > **Explanation:** A CMA is not the same as an official property appraisal. An appraisal is a more detailed and certified assessment of property value. ### What standard do formal property appraisals follow which CMAs typically do not? - [x] Uniform Standards of Professional Appraisal Practice (USPAP) - [ ] National Real Estate Broker Standards - [ ] Comparative Sales Approach Standards - [ ] Realty Valuation Guidelines > **Explanation:** Formal property appraisals follow the Uniform Standards of Professional Appraisal Practice (USPAP), which CMAs do not adhere to fully. ### What type of properties might a Comparative Market Analysis include for comparison? - [ ] Only vacant land - [x] Properties similar in size, location, and features - [ ] Properties in the same price range - [ ] Only newly constructed properties > **Explanation:** A CMA includes properties similar in size, location, and features to give an accurate estimate based on comparable recent sales. ### Can homeowners use CMAs to decide on renovation budgets? - [x] Yes, to estimate the added value of renovations. - [ ] No, CMAs are not detailed enough. - [ ] Yes, but only for small projects. - [ ] No, they should consult an appraiser. > **Explanation:** Homeowners can use CMAs to estimate the added value from renovations, giving a sense of potential market increase post-renovation. ### What primary data source do agents use for a CMA? - [x] Recent sales of comparable properties - [ ] Recent rentals of similar properties - [ ] Property tax valuations - [ ] Real estate market predictions > **Explanation:** Agents use recent sales of comparable properties to prepare a CMA, ensuring relevancy and accuracy in current market conditions. ### Can a CMA be used as a binding valuation for legal matters? - [ ] Yes, it is legally binding. - [ ] Yes, if signed by a realtor. - [ ] Yes, but only in disputes. - [x] No, it is an advisory tool only. > **Explanation:** A CMA is an advisory tool provided by brokers for setting prices, and cannot be used as a binding valuation in legal matters. ### Why might a CMA need to be updated frequently? - [ ] To reflect new laws and regulations - [x] To account for changes in the real estate market - [ ] To adjust listing prices monthly - [ ] To satisfy state requirements > **Explanation:** A CMA needs frequent updates to account for changes in the real estate market, reflecting the latest trends and comparable sales. ### What is excluded from a typical CMA report? - [ ] Comparable property features - [x] Future market predictions - [ ] Recent sales data - [ ] Property condition details > **Explanation:** A typical CMA report excludes future market predictions, focusing solely on recent sales data and current comparable property features.
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