What's in a Good Market Analysis

A comparative market analysis (CMA) is the most important,and, should be the first skill that any real estate agent learns how to do well. A CMA should be used to determine fair market value for a home based on certain conditions. The conditions for determining fair market value are that you have a willing buyer, a willing seller and no undue pressure on either party. This is market value. Not what the seller or agent or buyer feels like the value is, but instead, what buyers and sellers have actually paid for similar homes. After all, whether the real estate agent is representing you in listing your home for sale or representing you in the purchase of a new home, what could be more important than the value of the home?

Surprisingly, most real estate agents that I talk with can not perform this step in a meaningful way. As a REALTOR you should be able to demonstrate your understanding of the value of a home in the current real estate market and be able to convey your findings in a repeatable way and find similar results. The one caveat is that unlike most items within your home like a coffee maker or a television, a homes emotional value cannot be quantified exactly. This is what the purpose of a CMA should be used for - to eliminate (from a seller) any unrealistic expectations that they have about the value of their home and for a buyer to demonstrate what a fair asking price for a home should be.

There are certain statistics that should be used while compiling a thorough market analysis. Here is the information that I use for my Comparative Market Analysis. I will use an example of a CMA that I would put together on behalf of a seller.

At the first meeting with a seller we will walk around the property and take notes of the condition, benefits, features and location of the home. Before leaving I will ask the seller if there are any additional items that would make this home better than a similar home nearby. After all, they have lived there and would know the home better than anyone else. Upon arriving back at my office I would begin to gather information about other homes that have recently sold that are similar to the sellers home. I will use between three and five homes as comparable properties depending on how much variance there is with the sellers home. From these sold homes, I will make adjustments to the price of each comparable to equalize them to the sellers property. After making adjustments based on square feet, location, amenities, lot, parking, condition and various other items I will look at the current active competition of homes similar to the sellers home to gauge the competition. I will try to use three actively listed homes to base my comparison on. The third comparison item will be to find homes that are similar to the sellers that were listed recently and failed to sell. This data will be analyzed to determine possible reasons for why the homes did not sell. Often, it is because the seller was asking to much for the home. Finally, no market analysis is complete without a thorough examination of the real estate market that the seller's home will be listed for sale in. If it is a $500,000 house in an area with lots of records of home sales between $400,000 and $600,000 this would be the market I would analyze. This analysis will include sold homes, expired homes, days to sell, list price to sold price, active listings, homes sold in the last 30 days and the absorption rate of all homes currently listed. This will be used to determine the current market conditions your home will be listed in. All of this information will be put together to provide you with a pricing summary. The pricing summary is where I will recommend a price range that I suggest your home should be listed in. Pricing your home at the high end will bring few buyers, if any, and pricing it at the low end should result in a faster than average days on the market sale.

That's it. The process can take anywhere from 1 hour to 5 hours and sometimes longer if I feel that there is a need to go and preview some of the homes in the report that I have not already seen. The report will include pictures of the homes used in the analysis as well as tables and graphs to illutrate items where necessary. It will then be bound and presented to the seller upon our second meeting.

Before you list your home for sale or purchase a new home, you should ask for a comprehensive market analysis similar to the one I described above. If you are in my area, Alpharetta or Sandy Springs, Ga, and you are in the market to buy or sell a home contact me to ensure that you are prvided all of the necessary information so you can make an informed decision about your real estate situation. Visit my Alpharetta and Sandy Springs Real Estate website to learn more about the buying and selling process.

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