Comparative Market Analysis
Real Estate brokers use what is commonly called a Comparative Market Analysis (CMA) to help sellers establish a listing price for their home. A CMA is an estimate of a home’s value based on similar properties in the immediate area that have recently sold or been listed. The homes used in a CMA must be comparable to the new listing in square footage, amenities, age, location and bedroom/bathroom layout.
Your broker will provide a complimentary CMA after your initial listing appointment. You should review this data together with your agent to determine the listing price for your home. The right pricing strategy from the beginning will result in a faster and more profitable sale for you.
The Value of your home
When a home is sold, a willing seller and a willing buyer determine the value of the home through their negotiated sale price. That price then becomes a benchmark for the future sale of similar homes. But price is influenced by more than just precedent. Here are a few of the most important factors when arriving at market value.
The closer a home is to parks, transportation, shopping, schools and community services, the more desirable it is.
A larger home is typically more expensive to build, and buyers will pay more for additional living space. The number of bedrooms and bathrooms within that square footage is equally important. A house with only one bathroom, for example, will have a lower comparative market value, even if considered large by square footage.
This category reflects the upgrades or enhancements made by a previous homeowner or builder. A home with hardwood floors and granite countertops will command a higher premium than a home with carpet and laminate. Energy efficient windows, backyard landscaping, and custom cabinetry are all examples of features that will increase the CMA.
The nearer a home is to new construction, the more value it tends to retain. It is generally perceived as more modern, up-to-date, and perhaps safer. Homes that are outdated or in disrepair will sell for less to offset the cost of updating the property and potentially replacing old appliances and systems.
When a home looks appealing from the street, it is said to have “curb appeal.” Thoughtful landscaping, fresh paint, modern address numbers or a new front door can make a meaningful impression on potential buyers. While none of these updates can alter square footage or location, they certainly do make a difference.
Initial Pricing Matters
A thorough CMA is a critical part of the selling process since it is used to support the initial list price of the home. If the price is not supported by comparables in the area, the house will likely remain for sale without offers. Sellers only get one chance at getting this initial pricing right. A new listing will generate more interest, be shown more frequently and usually garner an higher sold price than an older listing. If a home sits on the market for a long period of time, prospective buyers will wonder why it hasn’t sold and may begin to suspect defects or issues.
It is also important to consider buyer financing when pricing a home. The bank will not lend more than the house is appraised for. If a home is priced above market value, it may be difficult for any buyer to get the necessary financing to purchase it.
The Problems With Overpricing
Your Legacy agent will work tirelessly to get the highest possible price for your property. However, when a home is priced too high for the market, the following issues may arise:
- You may lose credibility. In many cases, buyers have already done their own research and have a general idea of what homes in your neighborhood are worth. When you price too high, they may choose not to consider your property and instead look for something at fair market value.
- Your home may be used by other agents as proof that their listings have better values.
- Your listing may become stale. Buyers will start to wonder what is wrong with your home if it is on the market for longer than 30 days. You have the most leverage in the first couple of weeks.
What Does Not Affect The Sale Price
It’s important to note that the following do NOT predict the price at which your home will actually sell:
- The profit you wish to make from the sale.
- The money you’ve invested in improvements.
- The amount your friends or others have told you your home is worth.
- What you originally paid for the home.
- Past appraisals
- Tax Assessor’s Evaluation