A comparative market analysis (CMA) is a process real estate professionals use to determine the market value of a property by comparing it to similar properties that have recently sold, as well as to those currently listed for sale. A CMA is a crucial tool for listing agents as they determine a price for new homes for sale. It’s also a tool for buyer’s agents who are advising their clients to make competitive offers.

It can be difficult to create accurate and consistent CMAs. Many agents do not receive training in this area during their real estate classes and enter the business without this useful skill. This article will provide a step-by-step guide to creating reliable CMAs, as well as a free template to use when presenting your findings to clients.

Before We Get Started, Did You Know That CMAs Will Get You Listings?

A CMA is a great way to show your knowledge, expertise, and ability to take action.

You can use a CMA to seal the deal with a prospective client, as well as use a tool like Elevate’s CMA Wizard to kick-start the conversation with leads. Here’s what we said about this tool in our deep-dive review + video walkthrough of Elevate:

The CMA Tool from Elevate can help Realtors save a lot of time. It’s easy to use and perfect for creating multiple CMAs for an entire neighborhood as part of an email marketing campaign.

What’s Included In A Comprehensive CMA?

The way in which each person undertakes a comparative market analysis varies. The programs, tools and systems used for research, Coming up with an estimate and Explaining that estimate to the client also varies. The programs that the author uses, and the order in which they are used, are listed below.

1) Zillow Zestimate

I know that a lot of you dislike Zillow because it isn’t very accurate in many states. I get it. But your clients probably have Zillow at their fingertips and believe that it is a real estate authority.

It is important that you know the Zestimate for the property you are discussing with your client so that you can explain how accurate or inaccurate it is. If you do not mention the Zestimate or explain that Zillow does not have access to data on sold properties (in most states), your client may not trust your assessment.

2) Realtor’s Property Resource (RPR)

You can access the RPR system for free if you are a certified real estate agent. You will need to enter your NRDS number to prove your certification. If you don’t have access, there is a list of alternatives available. You can use this system to compare values, much like the Zestimate.

When I need to create a quick comparative market analysis, I typically use the RPR app. I can input the subject property and within seconds have a fairly accurate valuation. RPR gives an accuracy rating, but it should still be taken with a grain of salt. However, as long as I disclose to my client that this valuation was automated and that I’ll manually create one as soon as I have time, it works great!

3) Tax Records

So, the tax records aren’t going to give you the fair market value of the home; they’re just another piece to your CMA puzzle. If you’re a San Antonio real estate agent, the tax records will usually be about 90% of the market value of the home. Typically, market value tends to be about 5-10% higher than the taxed value.

4) MLS (Multiple Listing Service)

The MLS will show you what recent sales have taken place in the subject properties area and with these recent sales, you can create an accurate report.

CMA Rules of Thumb

  1. Square feet: When you’re searching for properties in your MLS, I recommend setting the square feet filter to within +/- 10% of your subject property’s square footage.
  2. Age: You want to set the filter for the age of the home within +/- 5 years of the age of your subject property.
  3. Neighborhood: I typically try to stay within the same neighborhood as my subject property, but sometimes that just doesn’t yield enough results. I recommend extending this to within a half-mile to a mile radius from the neighborhood of your subject property. If that’s necessary, however, I recommend making sure the other filters are tight to ensure you have as closely similar a property as possible.
  4. Kind of home: Is it a family home, townhouse, ranch, duplex, or something else? Setting a filter for this will help you get closer comparable listings.
  5. Beds and baths: You can also place the total beds/baths in the filters. For instances of half bathrooms, you can toggle this filter to round down or up as is necessary. For example, if your subject property has 2.5 baths, you can widen your search to homes with anywhere from 2 to 3 baths.

How Many Comparables Should I Be Looking For?

If the number of comparables I’ve found falls below five, I need to widen my search parameters. If it’s more than 10, I need to narrow them so I can find a closer match.

1. Gather All the Data Available About the Subject Property

The term “subject property” refers to the property whose market value is being determined. The process of comparison is essential to determining market value, so it is necessary to first learn all there is to know about the subject property in order to find other comparable properties.

How We’ll Use Subject Property Data in a CMA

We will compare the value of the property we are trying to estimate with other similar properties that have been recently sold or are currently on the market. Knowing all of the details about our subject property will allow us to make better comparisons.

It is important to be very knowledgeable about a property if you want to be able to accurately assess its value or sell it. Knowing more details about a home will help you compare it to similar homes that have recently been sold as well as to homes that are currently for sale. Additionally, you will be able to see how the value of the property relates to overall market trends.

Action step: Gather all the information you can about your subject property. At a minimum, you need the following data points:

  • Location (street, neighborhood, municipality, county)
  • Total square footage
  • Number of bedrooms and bathrooms
  • Acreage (if privately owned)
  • Year built
  • Renovations or major changes since the last time the home was sold
  • Interior finishes of note
  • Any extraordinary features (swimming pool, pole barn, and so forth)
  • Current taxes paid / millage rate
THE CLOSE PRO TIP: You can get a lot of this information from the MLS (from previous times your subject property has been listed), from tax records and county/township websites, and most importantly, from the owner of the property. The owner of the home will have intimate knowledge of specifics that the MLS or tax records won’t, so make sure to interview them thoroughly to get all your subject property’s details.

2. Gather Your Subject Property’s Previous Sale / Listing Data

The best way to figure out how much a market will pay for a property is to look at that property’s past sale and listing history. This will give you an idea of what the market has (or hasn’t) been willing to pay for the property in the past. Additionally, this will help you start to estimate the value of the home in relation to how the market has changed since the property was last sold.

How We’ll Use a Subject Property’s Previous Sale / Listing Data in a CMA

We will estimate the first dimension of a home’s value based on the market’s overall movement since the home was last sold.

For example, if a property was last sold five years ago, the median home price for that same property’s market niche today would be 5% more than it was at the time of the sale.

Action step: Gather all the information you can about your subject property’s previous sales and listings. At a minimum, you’ll need the following:

  • Previous list price(s)
  • Previous sold price(s)
  • Property details
  • Price adjustments
  • Days on market
THE CLOSE PRO TIP: Don’t forget UNSOLD property data. Knowing the circumstances under which your subject property was listed for sale (but not sold) is critical to a successful CMA. Just as a sale indicates that the market supports a particular value, an unsold property indicates a market that won’t support a specific price.

3. Gather Recently Sold Comps

The second most important step in conducting an accurate comparative market analysis (CMA) is to have relevant comparable sales, or “comps.” Comps are properties with primary features that are identical or at least similar to the subject property.

A solid comp is a property that has been:

  1. Sold in the last 12 months (or, in fast-moving markets, the last six months),
  2. Near to your subject property on the map, and
  3. Closed within a reasonable number of days on market and sale terms.

The worse a comp or property is for predicting your subject property’s value, the more dissimilar it is to your subject property.

How We’ll Use Recently Sold Comps in a CMA

We will estimate the second dimension of our property’s value based on what the market has recently paid for equivalent (or similar) property.

Search your MLS for sold properties that match your subject property in terms of the critical criteria you identified earlier, going back one year. Only use data from the past year because the market changes quickly. You want to find the most recent sales data to determine the market value of a home today.

Sometimes finding good comps is a challenge, especially if your subject property is one-of-a-kind. In situations like this, you’ll need to find comps to which you can make some value adjustments relative to the property you’re assessing.

It is easier to adjust for objective criteria like acreage and square footage than for subjective attributes like architectural design and landscaping.

4. Gather Active Listing Comps

An Active Listing Comp is a property that is similar to the one being evaluated and is currently on the market. This type of comp is important to the comparative market analysis (CMA) process because it provides information about what the subject property might experience in terms of interest from buyers in the current market conditions.

How We’ll Use Active Listing Comps in a CMA

The third and final dimension of the property’s value will be estimated using Active Listing Comps. This will give us an idea of how the current market reacts to similar listings. We will also be able to see how much competition we will face at different price points if we decide to enter the market.

Find four or five active properties in your MLS that match your subject property in terms of the critical criteria you identified in step one. These properties shouldn’t have been on the market for longer than twice the median days on market for similar listings. The best active listing comps are ones that are currently under contract, but not yet sold.

Reach out to the listing agent of every Active Listing Comp to get the insider scoop on their property. They may have information that will further give you insight into your property’s value. Also, if their property is under contract, they likely have buyers who are interested in a property just like your subject property. Get it sold before you list it!

The term “micro market trends” is just a way of saying “keep in mind what’s happening in the neighborhood.”

If there is significant road construction taking place near a property it may have a negative impact on the final number on a comparative market analysis.

If your subject property is located in a building that recently added a 24-hour doorman, that will slightly increase the apartment’s price above what market research says.

We can use this knowledge to predict values and adjust them accordingly.

What is happening in the area where the subject property is located that would impact the price of the home?

6. Put the Pieces of Your Comparative Market Analysis Together Into a Final Product

Your research has yielded a lot of great information that will help make your CMA as accurate as possible. Keep up the good work!

How do we take all the information and turn it into a final result?

Start With Your Subject Property’s History

Start with the sales history of your subject property. Based on the median prices (taking into account any renovations or alterations that have been made to the subject property), what should the current value be? This number will be the first in your property value prediction range.

7. Package Your Results & Share With Your Clients

You have your results and your client needs a presentation, context, and an understanding of how you got your answer.

In order to demonstrate how you arrived at your CMA results and determined a price range, The Close has put together a presentation template consisting of a few pages.