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How Well Do You Know Your Comps?

How Well Do You Know Your Comps?

Whether buying or selling a home, knowing the market is extremely important. Sellers need to understand the value of their home and buyers need to know what to offer. Agents are equipped to assist in both of these situations by providing a Comparative Marketing Analysis, or CMA.

If you are in the market to either buy or sell and have never heard of a CMA, make sure to review the following information as it can save you a lot of time and trouble in the future.

A CMA is a report that can vary in length that gives a comprehensive look at the comparable homes, or comps, that have recently sold in your area. The dates and the distance from which the agent pulls the comps for the home can vary depending on the number of homes that have recently sold in the area. However, agents generally pull home sales over the last 3 months in close proximity to the listing. The closer the agent can get to the seller’s home, the more accurate the results will be. Ideally, statistics will remain within 1 mile of the home.

How Well Do You Know Your Comps?

In addition to location and date of sale, they will also find homes of similar square footage and composition. If the seller is preparing to list their 2,000 square foot home with 4 bedrooms and 3 bathrooms, it would not fairly compare to a 3,600 square foot home with 5 bedrooms and 4 and a half bathrooms that sold down the street. The goal is to stay within 10% of the property’s square footage for the CMA to be accurate. Agents can also take into account the build year and lot size when building the comp list as well.

The closer a comparable sale is to the subject home, the better.

The goal of the CMA is to give the seller an accurate snap shot of the property value in the area. Often there will be a sprinkling of current listings for pricing reference in the analysis. These pending or current listings do not hold as much importance as the sold listings because the only marker for what someone will pay for the area is what has already happened.

It is integral to the seller to have an accurate CMA in order to properly price their home, so they can attract potential buyers to their listings. But are market comps alsobeneficial for buyers?

A good agent will make sure that their buyer is aware of comparably priced homes before they make an offer so it’s fair and reflects the market value. Even with a comprehensive CMA being completed, some sellers still price their homes too high. The buyer’s agent needs to make sure that in these scenarios, their clients have all the information about the market going into negotiations.

Buyers never want to pay more for a home than it is worth. Knowing the comps will keep both parties on a level field. Once an offer has been accepted, there is still one last hurdle that needs to be dealt with in regards to price; the appraisal. In order to secure financing, the appraiser has to agree to the value of the home based on the price offered. If those numbers don’t match up, a couple of things could happen. The seller can lower their asking price or the seller might refuse to lower their price and the buyer can contest the appraisal. If this happens, the CMA can be used as proof of the home’s value in that case. This is a rare occurrence but if were a scenario that were to happen while buying a home, a thorough CMA would be incredibly valuable.

If you are ready to list or buy a home, contact one of our agents at BHGRE Metro Brokers so we can help you make the best decision about pricing your listing or educate you about the comps in the area so you can offer the right price on your dream home. Call today at 404.843.2500.

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