What is a Comparative Market Analysis or CMA?
A comparative market analysis, typically called a CMA, is an informal estimate of market value, which is generally used as a tool to recommend a sales or listing price for a property.
Prior to putting a home on the market, a seller will obtain a CMA from a real estate agent to get an idea of what the sales price they might be able to obtain in a sale of their home.
When preparing a CMA, a short sale listing agent will enter the subject property (homeowner’s house), and pull comparative sales activity from nearby homes. The CMA takes into account active listings, pending sales, and recently closed sales to determine a general sales range. Adjustments are made for the market conditions, material improvements, physical condition of the property, and square footage to arrive at a more specific price.
After entering in this information about the subject property, a CMA report is generated, which is roughly about 20 pages, showing details about other property sales, public records, and adjustments to validate the recommended sales price.
The CMA is a useful selling tool to help a buyer feel comfortable with the value of a home they are considering buying. Appraisals are also used as a marketing tool, which provides even more details justifying the value of a property. Appraisals can be especially helpful for an auction, where buyers must make up their mind quickly as part of the auction bidding process.
Banks use CMA’s, which they order in the form of a “BPO report,” to assist them with determining the value of a property when it is in a pre-foreclosure situation. They use a BPO as a tool to project what their loss might be on a pre-foreclosure situation for a home mortgage.
Banks use BPO’s for short sale negotiations. When reviewing a purchase contract, they will use their BPO price to negotiate the highest and best price for a house sale to minimize their loss on a loan.
If you have any further questions about this, please contact us.