How Does Comparative Market Analysis Work?

How Does Comparative Market Analysis Work?

Knowing what a home is worth is a big challenge for both sellers and buyers. How much should you charge? How much should you pay? How do you know?

A Comparative Market Analysis (CMA) can help. It’s an evaluation of the listing and sales prices of similar houses in the same area. A CMA is useful for both those wishing to buy a home, as well as for those looking to sell their current property.

A CMA is different from an appraisal, which is a comprehensive evaluation of a property that's performed by an independent professional appraiser and used to qualify the home for a mortgage. A CMA is used to make an appraisal, but it's only part of the process.

A CMA is based on an agent’s knowledge of the area where a home is located. If the agent is experienced and has knowledge of the local market, the CMA should come in very close to the appraised value.

The Purpose of a CMA

While sellers use the CMA information to decide the price range for their home, buyers use CMA information to determine a price that's fair for a property. On the other hand, real estate agents and appraisers use CMA information to decide the market value of a property.

When homeowners want to refinance their mortgage or take out a second mortgage, a CMA will be done to determine if the value of the house is high enough to refinance at the current mortgage balance. The homeowner may also use a CMA to see if the value of the house has gone up and increased enough in equity in order to take cash out of the house or apply for an equity loan.


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It is important to fix the right price for a house. If it's too low, the seller will lose money. If the price is too high, the property may not sell.

How to Choose Agents for Your CMA

Sellers should ask at least three real estate agents to conduct CMAs on their house. Opt to select agents who have sold a lot of houses in the vicinity or with whom your neighbors have had success. A good agent should be able to give you a rough estimate of what houses sell for per square foot in the area.

Another tip: Don't tell agents what you think your house is worth, what you paid for it or the balance left on your current mortgage. Let them give you an unbiased opinion of the property's value. And if the results vary, try to seek out a couple more agents in order to balance the possible outcome of the CMA. An agent will usually do a CMA for free.

How a CMA Is Prepared

The information needed to create a CMA is usually obtained from public records in the county where the property is located. The Multiple Listing System (MLS), a computerized listing system where real estate agents list properties for sale and search for required properties for clients, is another source of information for a CMA.

Usually, an agent will use three comparable properties that are located within a mile of the given property to conduct a CMA. It's sometimes recommended to use six comparable properties--three that are currently for sale, and three that have sold in the previous three to six months. Each one is the same type of property, be it a duplex, a single family home or a condominium. If you live in an area where the real estate market is relatively sluggish, the agent may have to use similar neighborhoods in your city to develop the analysis.

Types of Listings Included in a CMA

The agent will walk through the house to see its condition, potentially suggesting renovations or improvements that will increase the house’s value. Once she has a clear picture of the property, she'll look for comparable properties in the area using the MLS. This list will include:

  • Active Listings: These encompass properties that are currently for sale. Active listings can be priced as the seller wishes. This is not indicative of the market value, which is the amount for which the property actually sells.
  • Pending Listings: In this case, a sales contract has been signed, but the sale has not closed. This means that the actual price of the property may change before the close. Pending listings may indicate the direction in which the market is moving. A property may remain on the market longer if it's priced above the list price of pending sales.
  • Sold Listings: These are properties that have sold and closed within the last year. Their prices indicate market value and the actual comparable price that a seller should consider when putting a house on the market. An agent may also be aware of properties which sold recently in private transactions and are not listed through the MLS--one more reason to work with someone who knows the area well.
  • Expired Listings: This covers properties that did not sell during the time they were listed, including properties that were removed from the market list without selling typically because they were priced too high and had been on the list for a long time. This sometimes happens if the seller decides not to sell or fires an agent in order to get a new listing from another agent. In other cases, the property may have been taken off the market because the seller refused to make needed repairs.

How the Listings Are Compared

These are the house characteristics that are included in a CMA:

  • Square Footage Houses with more square footage are worth less per square foot than smaller houses. So the houses compared should be as close to the same square footage as possible, give or take 200 to 400 square feet.
  • Age The homes being compared should have been built around the same time. A house constructed in the last 10 years may have a higher price than one built 40 years ago--even if they are next door to each other.
  • Amenities and Upgrades These features also raise the price of a house. For example, a home with a swimming pool may garner a higher price (unless, of course, the pool is in such poor shape that it actually detracts from the house's value). And a home that is in good condition will cost more than a property that needs a lot of work to become livable.
  • Location This has a big effect on how much a home is worth. Although it's largely a matter of the neighborhood--particularly the school district in which the property is located--there can even be differences within a single neighborhood. If one house has a corner lot or lake view, for example, it will have a higher price than a similar one facing a warehouse.

How the Price Is Presented

Once the research is concluded, the agent will give it to the seller as a report, which can range from a two-page list of comparable homes for sale in the market area or a 50-page comprehensive guide.

The report will contain a recommended selling price range, instead of a fixed price, because the properties selected may have some differences, such as age, size, physical condition or architectural style. Because the CMA is a subjective report based on the agent’s research, knowledge and experience, it is best to get several.

From the buyer's perspective, the agent will usually provide a number of listings in the neighborhoods of interest that are reasonably priced for the market. This can give a prospective buyer a good idea of what she may expect to pay per square foot, based on current market values, even if she chooses not to make an offer on one of the properties.

Brentt Taylor writes for, which provides information, tools and up-to-date news about mortgage and financial matters.


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