CMAs: How to Read the Reports Realtors Use to Value Homes
What Is a CMA?
Whether buying or selling, you will almost certainly see a Comparative Market Analysis (CMA) at some point during the process. Sellers find this report valuable in deciding on a pricing strategy, buyers may use it when deciding what to offer on a home, and existing homeowners often refer to this information when deciding whether to appeal their tax appraisal.
A CMA compares a subject property to similar homes currently on the market, under contract, or recently sold — these properties are known as comps. Your Realtor will likely create this report using their local MLS system.
Every MLS system is a little different. The following information will explain how to read the CMAs that I pull from Unlock MLS in Austin.
Definitions
First let’s define all the acronyms and column headings:
List ID & Area — The MLS listing number and the MLS area. Most of the time the properties will be in the same area as the subject property.
Address & Subdivision — Street address and subdivision (It’s not unusual for there to be several subdivisions listed)
Lvl – How many levels the home has, for instance 1-story or 2-story
Bd – Number of bedrooms
FB – Number of full bathrooms
HB – Number of half bathrooms
Liv – Number of living areas
Gar – How many vehicles the garage will accommodate. A “0” indicates there is no garage
Pool – Yes or no
YB – The year the structure was built
Acres – Size of the lot
Sqft – Size of the home based on square feet
$ Sqft – The price of the home per square foot (list price/square footage)
The remaining columns apply only to Closed properties. Very often the list price is not the price at which the property actually sells.
C$/Sqft – The cost per square foot based on the final selling price of the house
Close Price – The price at which the property sold
Close Date – The date that closing occurred
DOM – The number of days the property was on the market. This is the number of days from when it is first listed in MLS to when it goes to Active/Under Contract in MLS.
CDOM – Cumulative Days on Market. Sometimes a property is listed as Active/Under Contract in MLS but then goes back to Active status within a few days or weeks. The clock doesn’t reset when this happens! CDOM is the number of days from first listing on MLS to the final time it is Active/Under Contract.
How To Read the CMA
CMAs include a lot of data, so can seem overwhelming at first. However, they are super easy to read if you know what to focus on!
The most important info is the average and median CLOSED price. This is a good indication of the value of the home you are comparing. I normally send a link to all listings included in a CMA so that you can click through the pictures and descriptions to see what types of homes sell above and below that median price.
You should also look at median days on market.
If you are selling, you should look at all active properties. These are your direct competition. In fact, it’s great to visit these homes in person to see how your home compares.
If you are buying a unique property without many comps, I sometimes look at homes that are pending/under contract. I’ll call the list agents for those homes to find out more about the contracts they accepted. This helps us craft a winning offer for the house you want to buy.
Other Things to Consider
It’s common for buyers/sellers to focus on price per square foot. This calculation can make sense if you are working in high-end construction, but it is not an accurate way to determine value in the majority of cases. Your CMA is already filtered to include only homes that are similar in size to the subject property. Among similar-sized homes, other factors affect value much more than square footage.
Determining value through a CMA is easy and accurate for most master-planned communities where homes are very uniform and similar. In neighborhoods where houses and lots vary greatly, CMAs can be misleading and should by only one component of determining value. This is true in many parts of Austin, especially in neighborhoods with a mix of older homes in original condition, highly renovated homes, and new construction.
Finally, it’s important to know that most Realtors are not licensed appraisers. It’s incredibly important to work with a Realtor who is active in the market in which you are buying/selling so that you can be confident that you are correctly valuing the home you are selling or the home you intend to purchase. Any home being purchased with third-party financing will likely undergo an independent appraisal. If the home was mis-priced by the Realtor initially, it could cause huge problems down the line with the appraisal. Mispriced homes also sit on the market far beyond average days on market, causing sellers a lot of stress and hardship. Buyers should expect their Realtor to provide a CMA for any property they intend to offer on so that they know they are making a reasonable and fair offer, without overpaying.
If you’d like a CMA done for any property in the Austin, Houston, or San Antonio areas, reach out!