What's in a CMA Report?
When a real estate agent or broker conducts a comparative market analysis, they will create a report that details the findings. While there's no standardized CMA report, it will typically include:
The address of the subject property and three to five comparables
A description of each property, including elevation, floor plan, and the number of bedrooms and bathrooms
The square footage of each property
The sales price of each comp
Dollar adjustments for any differences
The adjusted sold price per square foot of each comp
Many real estate agents and brokers use software to generate comprehensive (and professional looking) CMA reports. If you plan to create your own, use
a spreadsheet to keep track of your research or try an online home-price tool offered by one of the real estate listing websites. Below: a sample pages from a report.
How to Do a Comparative Market Analysis
A CMA involves much more than just comparing the prices of recently sold homes in the area. Here's a rundown of the basic steps for creating an accurate CMA:
1. Evaluate the neighborhood.
To set the right listing price—or ensure a home you're interested in is a good deal—the CMA should take into consideration the general quality of the neighborhood. Where are the more attractive blocks? How close are community amenities? How close are community nuisances? What are the HOA rules? How are the schools? Are there any issues with curb appeal?
2. Gather details about the subject property.
If a real estate agent or broker does the CMA, they will review the existing listing (if there is one) and make an in-person visit to gather information about the subject home. They'll take note of the home's size (particularly the liveable space), age, style, construction, condition, layout, finishes, landscaping, and upgrades and updates.
3. Select comps.
Find three to five comparable homes in the area that have sold recently and that are as close to the subject home as possible. Ideally, the comps will be within one mile of the subject property and in the same school district. Focus on homes that are like the subject home in terms of square footage, lot size, bedrooms, bathrooms, and type of construction. Pay close attention to when the comparable property sold: The more recent, the better because real estate prices can fluctuate rapidly. If the home has a unique location—such as overlooking a golf course or the waterfront—the comps should have the same placement.
4. Adjust for differences.
The next step is to adjust for differences between the subject home and each comparable property. An experienced real estate agent or broker will be able to assign a dollar value to each of the differences and adjust the value of each comp accordingly. It may seem counter-intuitive, but if the comp has a feature that's inferior to the subject home, a positive adjustment is made to the value of the comp, and vice versa. As an example, if a comp has an extra bedroom (superior feature) it is reasonable to assume that the buyer paid more to get the extra bedroom. In this case, you would deduct an amount from the comp to account for the extra bedroom, thereby allowing for an apples-to-apples comparison. The value of the target home is never adjusted.
5. Determine the sold price per square foot after adjustments.
After adjusting for differences, divide the adjusted price of each comp by its square footage to determine the sold price per square foot. Next, add together the sold price per square foot of all the comps, and divide by the number of comps to get the average. Finally, multiply this average by the square feet of the subject property to find its current market value.
The Bottom Line
In general, the best comps are the ones that are the most similar to the subject home, the more recently sold, and the ones with the fewest adjustments required. The final price might need to be tweaked slightly, depending on the market. For example, if the market is hot or if inventory is low, the price might be slightly higher. Conversely, if there are a lot of similar homes on the market, the price might have to come down to be competitive.