Creating a CMA, or comparative market analysis, is essential for pricing your home to sell. Far more important than what you want to ask for your home is what buyers are actually willing to pay in the local market. And that’s exactly what a CMA will help you determine, based primarily on what comparable homes in the area have sold for in the recent past. So check out this step by step guide for creating a CMA for New Jersey home sellers.
What Is a CMA?
The first step in creating a CMA is to understand exactly what a CMA is. Basically, a CMA is “an estimate of a home’s value based on recently sold, similar properties in the immediate area.” Agents use this tool to help home sellers set a list price. But you, as a New Jersey home seller, can do your own research and create a CMA yourself – if you know exactly what it is meant to be and do.
“A comparative market analysis helps sellers choose the best listing prices for their homes. The ‘best’ price is the one that’s not so low it leaves money on the table, and not so high that the home doesn’t sell at all.” This is done by comparing the home in question against homes similar in size and features in the immediate area. The CMA examines the prices of such homes that have sold in the past three to six months to arrive at fair market value, which is what buyers are willing to pay for a comparable home in that location.
Typically, creating a CMA involves factoring in the following variables to arrive at the “subject property value”:
- “The addresses of the subject and comparable properties
- Information and characteristics of each property
- Sold prices of the comparables
- The total square footage of each home
- The adjustment values for lot sizes, bedrooms, baths, and garages
- The adjusted sold prices
- The dollar-per-square-foot value”
Steps in Creating a CMA
Now let’s take a look at the actual steps New Jersey home sellers should take in creating a CMA . . .
CONSIDER THE NEIGHBORHOOD
A close look at the neighborhood will give you an idea of property values and trends. Creating a CMA with the neighborhood in mind is important because “the local market can affect a CMA’s accuracy. To set the right price, it’s essential to be familiar with a neighborhood and knowledgeable about the historical and current sale and rental value of real estate there.”
Things to consider when assessing a neighborhood include:
- The ratio of homeowners to renters
- Overall quality
- Proximity to amenities and schools
- The curb appeal of homes
- Proximity to noise and eyesores
PERUSE SIMILAR PROPERTIES IN ONLINE LISTINGS
The next step for New Jersey home sellers in creating a CMA should probably be taking a look at online listings for homes similar to yours and as close as possible. Be sure to consider age, condition, home size, lot size, construction type, and, of course, list price.
NOTE IMPORTANT ASPECTS/FEATURES OF YOUR HOME
With respect to this, here’s what experts recommend when creating a CMA: “Note the most important metrics, such as size, layout, age, condition, finishes, and landscaping, as well as any features that might add value, including a pool, finished basement, large garage, or oversized lot. And be on the lookout for issues that might affect the price negatively, like a roof in need of repair, poor overall condition, lack of central air conditioning, or other hidden issues.”
FIND AND ASSESS COMPARABLE HOMES IN THE NEIGHBORHOOD
The next step for New Jersey home sellers in creating a CMA is to find three or four homes in the immediate area most like yours in all the aspects and features we mentioned above. After you’ve chosen a handful of comparable homes, you’ll need to carefully examine:
- Date of Sale – You want to use homes in your CMA with a sale date as current as possible, typically homes selling no more than six months prior. If the sale date was too long ago, market conditions may have changed.
- Exact Location – You also want comparable homes to be as close to yours as possible, preferably in the same neighborhood or subdivision. Doing so will allow your CMA to be much more accurate for better pricing.
- Main Features – Then you need to consider the main features of the homes you’ve chosen for comparison to make sure they are as similar as possible to yours. This part of creating a CMA “applies particularly to the number of bedrooms, baths, square footage, and lot size. When the selection available is generous, use properties of similar construction type and architectural style.”
CREATE YOUR CMA REPORT
In this final step of creating a CMA, you do the calculations and create your report on which you’ll base your list price. But, first, be sure to make any necessary price adjustments for differences between your home and the comparable homes – differences such as one more or less bedroom or a larger or smaller yard.
Having done that, you calculate the sold price per square foot for comparable homes. You do this by dividing the adjusted sold price by the total square footage.
Then, multiply the square footage of your home by the figure you just derived. This will yield your home’s current market value. And then you’ll be able to set your price.
Should You Use an Agent?
But you still may not be finished. You may have to modify your price according to local market conditions, such as how competitive it is and what the inventory looks like. Creating an accurate CMA is actually a pretty complicated process owing to all the variables. Yes, you can create a CMA yourself, but you stand a better chance of pricing to sell by allowing your New Jersey agent to do it. Our experienced agents can help you get that crucial price right. Contact us today at (908) 320-7995.