It’s time to talk about the comparative market analysis. Because, let’s face it, as a real estate agent, you’ve probably had more than your fair share of unrealistic expectations, emotional sellers, take-no-prisoners buyers, and competitive subterfuge.
Any of these scenarios sound familiar?
Your experience might tell you how a home should be priced, but you can’t depend on your resume alone to convince sellers or buyers to trust your opinion.
A comparative market analysis (CMA) lets you move the conversation with buyers and sellers out of the guesswork arena and negotiate based on an objective assessment of what a home offers and what it lacks compared to other, similar properties.
It’s the rare CMA that’s bulletproof, but one built on a solid foundation can go a long way to building trust and confidence, leveling the playing field, and helping to close more deals with happier clients.
In this article, we’ll show you how you can use your CMAs to build trust with clients, take the guesswork out of pricing a home, and close more sales.
First, the lingo. A comparative market analysis is also called a CMA, and brokers and agents often shorten it further by simply referring to these reports as, “comps.”
By any name, it is a method for setting the price of a home by comparing its features to the features and sale price of similar homes in the area. When real estate agents conduct a comparative market analysis, they use these and other factors to make the comparison:
In addition to setting a selling price, agents also use CMAs to negotiate with buyers — making them a crucial sales tool on both sides of the table.
Recent sellers typically sold their homes for 99% of the listing price, and 22% reported reducing the asking price at least once.
Before we get into how agents can effectively use their comps to close more deals, let’s take a minute to review the steps involved in creating a CMA.
To put together a CMA, begin by gathering as many details about the home as possible. You can use all the points listed above, as well as any others that may be relevant such as:
With a CMA, all of the home’s features have to be taken in context. All other things being equal, a home that backs into a freeway entrance will have a different value from one that’s on a cul-de-sac, and so on.
Once you’ve pulled together a detailed description of the home’s features (and what it’s lacking), you can start to pull comps to find out what similar homes in the neighborhood sold for.
1. Always compare apples to apples. If you’re doing an analysis for a single-story home, don’t use comps for townhomes or condominiums.
2. Pay attention to the sale date. Ideally, you want to compare homes sold within the past 90 days and no farther back than the past year.
3. Stick with the same neighborhood and school district whenever possible. Buyers often choose a neighborhood for its school district and, in densely populated communities, homes in the same neighborhood might be closer to one school than another.
4. Collect at least six comps to use in your analysis.
Coming up with the right listing price is arguably an agent’s most important job.
Price a home too low, and you’ll disappoint your client, miss out on referral and repeat business, and possibly even damage your reputation. Price a home too high, and it will sit on the market — maybe even until your listing agreement expires.
But when it’s done correctly?
The right CMA can help you provide a stellar experience for your clients.
Because the reality is, sellers often have unrealistic expectations about what a home is worth. But it’s hard to argue with a CMA that’s detailed and well-researched. With a strong CMA, you can provide your clients with an objective analysis for setting and justifying a home’s price to help set the right expectations and keep your clients happy throughout the selling experience.
A CMA can also be especially helpful when you’re competing with other brokers for a listing. If another agent’s pitch isn’t backed by anything but their opinion, you’ll have a competitive edge. And even when you’re up against another broker or agent who has also prepared a CMA, you’ll be able to fully explain the rationale behind the price you’re suggesting.
41% of sellers who used a real estate agent found their agents through a referral by friends or family, and 26% used the agent they previously worked with to buy or sell a home.
Delivering your best estimate of a home’s worth can be tricky business.
You’ll want to gather all the information you can during your listing appointment, so that you can immediately prepare a well-researched CMA and quickly follow up with the seller.
It can also be a good idea to ask the seller what price they expect to sell their home for. This way, if your CMA doesn’t happen to match up with the seller’s expectations, you know exactly what reasons to point to during your follow up meeting.
Maybe the seller has put a lot of money into improvements that your experience tells you are not in line with what buyers look for. Or maybe the seller thinks their dated kitchen with ‘50s wallpaper couldn’t be more appealing.
Be prepared with photographs of similar listings that sold quickly for top dollar and the time it took to sell other outdated homes so you can move the conversation from personal taste to more objective considerations. This way, you also keep the ball in the seller’s court, so they can feel confident they’re participating in the pricing decision.
The benefits of a CMA don’t stop after you’ve won a listing.
A CMA can also help you to:
Let’s take a closer look at each of these benefits, one by one.
With a CMA, you’re armed with both a list of the features of the home you’re selling and those of comparable listings, giving you awesome insight and talking points for buyer discussions, especially when a home has hard-to-find features.
Suppose, for instance, that the home you’re selling is one of only a few in the neighborhood with a pool. Now you’re not just selling a home with a pool, you’re selling one of the only homes in that neighborhood with a pool.
Let’s go back to our example of the take-no-prisoners buyer.
Your CMA gives you ammunition to go back to a buyer who’s presenting a lowball offer with sound reasons why the offer falls short, along with evidence that — when you say you can find a buyer willing to pay your price — you most likely can.
If you’re selling in a market where prices are rapidly rising, you’ll be able to refer to your CMA to show how prices have escalated.
You then can point out that buyers need to act fast before prices rise again, or demonstrate that the price they’re paying today will likely increase tomorrow.
The value of a CMA extends far beyond helping you to set the right price for a home, especially when you combine it with market experience and client-driven mindset.
Before you deliver the CMA to the seller, make sure you’ve reviewed it and are prepared to answer their questions and overcome any objections.
If one of your homes shows a very low sale price, do some investigating to find out why the home sold for that price. Was it a cash buyer? Did the home have structural issues? Or simply a dated interior? Be proactive about telling the story behind the comps so the seller understands you’re not just selling, you’re educating them on the latest market and real estate values.
With the right approach and intention, your CMA can be more than a standard report. It can be a crucial conversation starter that sets the right expectations and sets you up for long-term client relationships grounded in mutual trust and respect.