A comparative market analysis (CMA) is an estimate of the price of a home that is used to help sellers set sales prices and help buyers make competitive offers. The analysis considers the location, age, size, construction, style, condition, and other factors of the property and other comparable factors. Investors who buy properties use market analysis to identify homes that are profitable and that offer the best option for their investment strategy. Sellers create an analysis of the real estate market to determine the best selling price and the best marketing strategy.
Paul, who achieved financial independence at 33 and took a brief “retirement”, began investing in real estate in 2000 to protect and grow his wealth. Fortunately, there are several great ways to get the information you need to perform a real estate analysis on your own. To carry out the analysis, real estate agents are looking for houses recently sold in the same area that are as similar as possible to the property in question. A real estate market analysis, or a comparative market analysis (CMA), is a study of the current market values of properties, comparable to your own, that serves as a tool for determining the market value of your property.
Although the resulting value is an approach that also incorporates the objectives of the seller or buyer of the property, a CMA is a complex process that requires technical knowledge of the market in general and how various aspects of real estate influence the value of a property. While home appraisals are performed by appraisers to create home valuations, CMAs are completed by licensed real estate professionals to estimate fair market value. Real estate agents and brokers create reports to help sellers set list prices for their homes and, less frequently, to help buyers make competitive offers. You can use various types of information to assess trends in a specific housing market and compare specific properties that might interest you.
In the process, you'll develop a dashboard to compare the strengths and weaknesses and the opportunities and risks of different real estate markets. Asking a real estate agent to do a market analysis for you has some advantages but also major drawbacks. The data collection process is one of the most important steps in conducting real estate market research, since it allows you to gather information that will help you determine if the project is viable and your investment is safe. Real estate agents may be so engrossed in daily activities that they cannot see the big picture that real estate investors rely on to succeed.
Keep in mind that preparing a comparative market analysis is a complicated process that requires access to comprehensive sales data and knowledge of local and national markets, which is why it must be performed by a licensed real estate agent. Every real estate property is unique, so chances are that not all of the homes on your list of comparable properties have exactly the same features and amenities.
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