A comparative market analysis is one of the most important tools in a real estate agent’s arsenal. Why? Because sometimes one of the most misunderstood steps of the home selling process is setting the sales price. Sellers often get overrun with the emotional connection to their home and often overestimate the value.
The best way to get a true picture of the value of your home is through a comparative market analysis or CMA. The CMA gives a nuts and bolts look at the facts: a rundown of the house’s stats, and a listing of similar houses in the neighborhood that are on the market or have recently sold.
The CMA provides basic information:
- number of bedrooms and baths
- square footage
- size of major rooms
- age of the house
- property taxes
- how to contact the agent who is selling the house
It doesn’t include:
- what upgrades have been made
- the color of the walls
- the condition of the floors
- any structural defects.
The analyst will provide comparisons of recent sales in your neighborhood. To get the best idea of how you should price your house, you should compare houses that are the most similar — houses with similar square footage, houses with the similar size back yard — and age.
The objective of the analysis is to determine the highest price you can set for your house and still expect to sell it without it being on the market too long. The asking price the seller and agent decide on is usually set slightly higher than market value, maybe 1 or 2 percent.
Once the comparative market analysis is complete, the next step is determining the asking price.
One of the major deciding factors is the state of mind of the sellers. Do they need to sell quickly? Or is getting top dollar the most important factor?
Overpricing rarely is beneficial, but can be a common gut reaction among buyers.
Some of the most common factors leading to pricing too high include:
- upgrades that were added
- need for money
- original price was too high
- wanting bargaining room.
Sellers often overvalue some of the home improvements they’ve added. It’s not that what the seller did isn’t valuable, it’s just that it may not be the style a buyer prefers. Not everyone will want a swimming pool or sauna. Some might be turned off by the style of the backyard landscape you’ve poured thousands of dollars into.