THREE REASONS WHY A “CMA” IS NO GOOD
October 3, 2017 | Richard Sites
A CMA, or Comparative Market Analysis, is the lifeblood of residential real estate. Countless software programs are devoted to designing CMA presentations and agents dutifully adhere to these programs when making listing presentations.
But are these really CMA reports beneficial or could they even be hindering your sale? Let’s talk about it for a minute.
A CMA is designed to give an accurate analysis of what a home is really worth. But here are three reasons they may not be your best choice when pricing your home.
Small Data Set
In any statistical analysis, the larger the data set the more accurate your conclusion should be. When medical studies are done, the larger the number of test subjects involved the better the results. The same is true of real estate.
Comparing just three houses (as the typical CMA does) can not accurately gauge the value of the home. The number three is simply copied from the format used by professional appraisers.
Buyers Are Looking At Different Areas
The typical CMA uses the most recent sales and those closest to the subject property. But unless buyers are set on living within a certain community where homes are nearly identical, limiting your analysis to these sales be inaccurate since buyers may be looking at many different communities. Here’s an example.
In Jupiter, there are many communities with similar priced homes which all attend the same school districts. So if a CMA only looks at homes within a certain neighborhood and excludes others the result could be very misleading.
How Much Is a Kitchen Worth?
The biggest issue with these CMA reports is that the agent is required to make adjustments to the selling price, either up or down, based on what “comparable properties” have or don’t have in common with the subject property. But how would an agent know this?
A kitchen upgrade could be worth $10,000 or $30,000.
How much is that bathroom upgrade worth? Do you know?
See the problem with this approach? It is nearly impossible to determine what these items are really worth.
The Take Away
When comparing homes, the larger your data set, the better your result. And if comparing properties for which there are a large number of choices, this becomes even more important. For example, if a buyer is looking for a 2 bedroom/2 bath condo close to the beach as a retirement home, there are literally hundreds of them along the coast to choose from.
If you would like to have a conversation about meeting your real estate goals, use the form below to contact me. And be sure to visit my You Tube channel where there are several hundred videos on Coastal Florida real estate and our fabulous lifestyle.