Definition
A Comparative Market Analysis (CMA) is a report prepared by real estate agents to estimate a property’s current market value. By comparing the subject property to similar properties (“comps”) recently sold, currently listed, or withdrawn in the same area, a CMA provides a realistic price range. Sellers rely on a CMA to set competitive asking prices, while buyers use it to formulate informed offers based on local market activity and specific property features.
How a CMA Works
To create an accurate CMA, agents follow a systematic process that balances data from the Multiple Listing Service (MLS) with expert adjustments for property differences:
- Collect Detailed Information
Gather data on the subject property’s size, condition, number of bedrooms and bathrooms, special features (fireplace, garage) and location.
- Identify Comparable Properties
Select nearby homes with similar square footage, lot size, style and age that have sold recently or are currently on the market.
- Analyze and Adjust for Differences
Standardize comparisons by adding value for desirable features (finished basement) or subtracting for outdated elements.
- Assign Weights and Calculate Value
Give greater weight to the most similar comps and compute a weighted average to determine an indicated market value or listing price.
Examples of CMA Use in Practice
- For Sellers
A listing agent uses a CMA to advise a homeowner on a realistic asking price. If the homeowner expects a higher price than market conditions support, the CMA demonstrates why a lower price aligns with recent comps—boosting the likelihood of a sale.
- For Buyers
A buyer’s agent prepares a CMA to guide offer strategy. For example, if a home is listed at $400,000 but comparable homes sold for less, the agent may recommend a lower offer to negotiate a better deal.
Sample Scenario
The Cooper family wants to buy a 4-bedroom, 2,000 sq ft house listed at $400,000. Their agent prepares a CMA comparing homes in the neighborhood with similar bedrooms, bathrooms, garage space and lot size. Recent sales data indicates slightly lower prices. Based on this CMA, the agent advises Cooper to offer below asking price—avoiding overpayment.
Importance of a CMA
- Considers property specifics—age, renovations, amenities—and current market trends like demand and inventory levels.
- Provides expert-informed price estimates but is not an official appraisal.
- Relies on up-to-date MLS data, typically using 3–10 comparable sales from the past 3–6 months to reflect current conditions.
Key Takeaways
A CMA is a practical tool real estate agents use daily to support pricing decisions, negotiate offers and educate clients. By bridging the gap between client expectations and actual market data, a Comparative Market Analysis facilitates fair, informed real estate transactions.
