More on how a professional CMA shows you what comparable homes and condo units are selling for, all around you
Elements of a Great Comparative Market Analysis
You already know that savvy home sellers ask for a comparative market analysis to help place a value on their home before listing it with a real estate agent. You've probably received flyers or post cards from local real estate agents offering CMAs or other forms of free reports to tell you how much your home is worth. But what exactly is a CMA composed of, and how does it do its job?
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Although reports can vary from a brief list of comparable recent home sales to a 50-page guide, the length and complexity of the report depends on each individual agent's business practice. All CMA reports should contain the following data:
Active Listings are homes currently for sale; they are your competition for buyers. They are not actually indicative of market value, because sellers can ask whatever they want for their home; it doesn't mean they will end up getting it. But they are interesting to take note of and follow their progress; if your home is priced higher than the list price of similar active listings, it could sit on the market longer.
Sold Listings are homes that have closed within the past three to six months in your neighbourhood; they are your comparable sales. If no sales of comparable homes exist in the last six months (for example, if you own a very unique property or live in a remote area where nothing similar has recently sold) older sales and other valuation techniques will come into play.
Deal Fell Through / Back on Market / Cancelled Listings are properties that were taken off the market for a variety of reasons; usually because the prices were too high and the properties did not sell due to no offers or low-ball offers only. However, listings also go off-market for the following reasons:
- The sellers decide they no longer want to sell.
- The DOM (days on market) was getting too long, which in some people’s minds implies a stigma against the house. Agents sometimes withdraw listings so they can put them back as a new listing – voila, no stigma.
- The deal fell through during the conditional period because the buyers were unable or unwilling to waive or fulfill certain conditions.
- The sellers were unhappy with their agent and retained a new one.
Expired Listings are ones that did not sell during the listing period and may have been unreasonably priced or otherwise unattractive to buyers. Listings can also expire because they were not aggressively marketed.
Comparable sales are those that most closely resemble your home; you would not compare a duplex home to a one-bedroom condo unit, even if it’s right next door. The focus will be on the recent home sales that are mostly identical to your home in size, shape and condition, such as:
- Similar size: Larger square-foot homes tend to be worth less per square foot than smaller square-foot homes
- Similar age: Ideally, the construction period of the home should be within a few years of the other comparable sold homes, because Edwardian homes loaded with character tend to sell for more than cookie-cutter homes built in the 70’s, which in turn will sell for less than brand new homes with all the ultra-modern conveniences and finishes.
- Similar amenities, upgrades and condition: A common appraisal technique is to deduct value from your home if other homes have upgrades and yours does not. A completely remodelled home is worth more than a fixer-upper. Homes with one bath are worth less than homes with two or more baths.
- Location: Getting down to the nitty-gritty of this overused term means looking at the small stuff: a home with a beautiful view, for example, is worth more than a home facing a cement wall. Homes located on busy arteries are worth considerably less than homes on quiet cul-de-sacs. We will compare your home to those in similar locations.
- Standouts: Statistically, sales that are priced far above or far below the group average are suspect; there likely are valid reasons for these extremes and Jamie will investigate before presenting them to you as valid comparables.
Analysing the Toronto Housing Market
A full and detailed report of comparable sales still doesn’t tell the whole story of how you should price your own home – we still have to complete a similar market analysis of the properties listed and competing with your home at the same time! Your list price recommendation can be adjusted up or down depending on how many homes are listed in your immediate area at the time, and what their owners are asking. If the current market has a high inventory of homes similar to yours currently up for sale, we might want to wait for some of them to sell before we list your property – or amend your asking price downwards a bit to remain competitive.
Jamie will present the CMA to you in an easy-to-understand format so that together, you can evaluate and interpret the data to come up with an accurate estimate of true market value for your precious home.