Pricing Your Home – The CMA
Smart home sellers obtain a comparative market analysis before listing their house and putting it on the market. Real estate agents will provide this report for you “free of charge”. It is their best marketing strategy to obtain the listing on your home. Although reports can vary, from a two-page list of comparable home sales to a 50-page comprehensive guide, the length and complexity of the report depends on the agent’s business practice. However, standard comparative market analysis reports should include extensive data that will enable you to price your house effectively.
A CMA will show you active listings of homes currently for sale in your area. Active listings are homes currently for sale. These listings matter only to the extent that they are your competition for buyers. They are not indicative of market value because sellers can ask whatever they want for their home. It doesn’t mean any of the prices are realistic. The offered sales prices do not reflect market value until they sell, and in buyer’s markets, for example, most sell for a lot less.
A CMA will also show you pending sale homes which are formerly active listings that are under contract. They have not yet closed, so they are not yet a comparable sale. Unless the listing agent is willing to share information about the pending sale — and many are not — you will not know the actual sold price until the transaction closes. However, pending sales do indicate the direction the market is moving. If your home is priced above the list price of these pending sales, you could face longer days on the market. Homes that have closed within the past six months are your comparable sales. These are the sales an appraiser will use when appraising your home for the buyer, along with the pending sales (which will likely have closed by the time your home is sold). Look long and hard at the comparable sales because those are your market value.
Withdrawn or canceled listings are properties that were taken off the market for a variety of reasons. Usually the reason homes are removed from the market is because the prices were too high. The median prices of this group will almost always be higher than the median prices of comparable sales. However, listings cancel because a seller might simply change their mind about selling their home. Many times a seller will cancel because the house has been on the market too long. Too many days on the market can often make potential buyers skeptical about purchasing a home. Sometimes a listing is canceled because a home seller fires the agent. It’s not uncommon for unhappy sellers to fire an agent and hire a new agent.
Expired Listings will reflect the highest median sales price because they did not sell and were probably unreasonably priced. Some of the expired listings could also show up as an active listing, listed by a new agent at a new price. Listings also expire because they were not aggressively marketed or because the home was in need of repairs.
Comparable sales are those that most closely resemble your home. It is difficult to compare a tri-level home to a single-story home. Select the homes from this list that are mostly identical to your home in size, shape and condition, such as: similar square footage and similar age of construction. Ideally, the age of the home — the year it was built — should be within a few years of other comparable sold homes. Appraisers will deduct value from your home if other homes have upgrades and yours does not. A home with a swimming pool will have a different value than a home without a pool. A completely remodeled home is worth more than a fixer. Homes with one bath are worth less than homes with two or more baths. Deferred maintenance will count against you.
Everybody knows that real estate is valued on “location, location, location,” but have you considered what that means? A home with a view of the city, for example, is worth more than a home facing a cement wall. Homes located on busy thoroughfares are worth considerably less than homes on quiet streets. Compare your home to those in similar locations. If your home sits across the street from a power plant, look for other homes with power plant exposure or those located along railroad tracks, among other undesirable locations.
Source: “CMA Comparative Market Analysis.” About.com Home Buying / Selling, Web. 09 Dec. 2012.
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