Do you know how strong the real estate market is in your area? It’s important to know this information as this is what allows you to make smart, strategic decisions. Determining the value of your market can be done with a comparative market analysis or CMA. We’ll teach you how to perform a comparative market analysis and what you can expect from the results.
Steps to Assessing Your Real Estate Market
It’s important to note that a CMA is not the same as an appraisal, so it doesn’t have the same financial or legal value. Still, you can learn a lot from doing this analysis, including whether you want to buy, sell or rent out properties.
Comparative market analyses tend to have the following information:
- Active listings. Active listings include all properties currently for sale. These properties matter because they are your competition. That said, they are not necessarily indications of fair market value. People can ask whatever they want for their homes.
- Pending listings. Pending listings are under contract, though they have not been officially sold. The listing agent may or may not want to share that information with you. Until they do, you won’t know the value of the home until it’s closed on.
- Sold listings. Sold listings include all homes that have recently sold, usually within the last 3-6 months. These prices are what the appraisers use, so they are accurate.
- Withdrawn. There may also be some properties that were taken off the market. Usually, this happens because the price of the home was listed too high. However, it can also be due to other reasons such as seller’s remorse or extensive repair requests.
- Expired listings. Typically, listings move to expired because they were priced too high. You may see expired listings appear as new when they are refreshed in the system.
It’s All About Location
Location impacts every property. First, a prime location that is close to grocery stores, schools, entertainment, jobs, etc. is more desirable. Buyers are willing to pay more for these properties, increasing demand and competition. Second, location allows you to compare similar properties in a given area. When evaluating homes in your market, consider their location and if buyers would pay more to live there.
Lastly, buyers pay attention to square footage, house age and number of bedrooms and bathrooms. Other amenities that improve the quality and value of a home are pools, fireplaces and central air conditioning units. To discover what’s important to buyers in your area, compare homes with certain characteristics (i.e., pools, fireplace) to those without them.
Some markets are naturally hotter than others. In recent years, the west coast has seen explosive growth, particularly in Utah and Northern California. Yet all markets have their strengths. By reviewing the comparables in your area and considering the features that are important to buyers, you can assess the true value of your real estate market.