Comparable Market Analysis - Determine what your home is worth
In order to sell your home and make the most on your investment, you need to know what it is worth. One of the best reference tools determining your property value is the Comparative Market Analysis (CMA), a document your real estate agent provides which includes the following valuable information:
- Asking and selling prices of recently sold homes in your area
- Houses in your price range and area sold in the past 6 months
- Current inventory of houses on the market
Selected homes, also called “comps” will list information about the year built, square footage, number of bedrooms and baths, and amenities such as basements, fireplaces, or pools, etc. Using data from a CMA, your agent will suggest an estimate of the fair market value of your home for you to base your asking price (typically 1 – 3% above fair market value). This document shows you what previous buyers have been willing to pay for similar property in your area over the past few months. A CMA can represent any selected period of time, from a week to a year if needed. It will likely contain comparable homes currently for sale and pending sale as well to give you a balanced snapshot for review. However, there are differences that should be considered when comparing seemingly similar properties, such as financing that could have influenced the selling price and lot/acreage differences.
Keep in mind market availability when evaluating CMA data – sold prices may be understandably higher at lower inventory levels, and vice-versa. As you can see, comparative analysis must be evaluated in total context of the housing market for the time period to be truly valuable in determining your home’s worth. Your real estate agent can help you put all this useful data in perspective and easier to understand.
Remember that buyers and their agents use comparative market analysis as well to gauge what homes “should” sell for based on similar data you receive as a seller.
Formal Appraisals
Your realtor can give you good advice on current market conditions and local buying trends that may affect the valuation of your home. In most cases a CMA should be sufficient for your home valuation needs, but you might ask your agent about the need for a formal appraisal if there are circumstances that make it difficult to put a value on your home. An appraisal bases the value of your home only on past sales and is provided for a fee.
Home Inspection
A home inspection is a good idea to consider, as it will establish the actual condition of your property at the time of sale and inform you of any potential defects that may adversely affect your position as a seller. Home inspections typically report on the structural integrity of your home and foundation, and include an evaluation of the electrical, roofing, and plumbing conditions.
Whether you use a comparative market analysis approach or have a formal property appraisal performed, remember that your home is now a commodity whose worth is dependent on a variety of objective factors such as physical condition and market conditions. Keep a business-like attitude and do as much research as possible to be an informed seller.