The comparative market analysis (CMA) is one of the quintessential tools in an agent’s advertising tool box. The CMA is practically the entire reason homeowners even let real estate agents walk through their front doors.
The CMA has certainly evolved as the real estate industry evolved. Tablets, online valuations and street-view mapping software are just some of the technological advancements that agents need to consider when building their reports and presenting it to their clients.
An effective CMA is best delivered with an all-inclusive marketing plan that provides relevant and useful follow-up information in a professional sales manner. Without an effective plan for your CMA, you can’t expect to get anywhere in your real estate career.
There are four components of comparative market analysis that you need to have in every report to paint a detailed financial picture for your buyers.
1. Info about the current owners and their financial positioning on the property
We want to be specific about who owns the property and how much they owe — if anything — on the house. Is it a husband and wife? Is it a joint venture between three cousins? Is it a trust or LLC that owns the property?
Knowing who owns the property, how they own the property and why they want to sell the property will help us effectively deliver the CMA to our buyer.
If it is an investor who owns the property as an LLC, then we know they are looking to squeeze every dollar out of that sale. If it is a husband and wife who are looking to move up, they might be willing to negotiate other items in the contract before selling their home.
The best way to look up information on the owners of the property is to either research the local clerk’s website or to contact the title company who handled the last closing on that property. We can then do some backward math on calculating the balance owed on any mortgages on the property.
2. Research on the property itself
What are the basic stats of the home? What is the overall condition of the home? Are there over-improvements to the property? Is the property functionally obsolete?
Compile as much information about the current condition of the home as possible. Potential buyers will want to know more information about the property. They expect you to be the expert, so you better know the details of the product you’re selling.
Great tools to research information on the property include Realtor Property Resource (RPR), Realist, iMapp and Google Earth. Other resources include the local clerk’s website for any permitting or lien issues too.
3. Data about the conditions of the neighborhood, both physical and financial
Is the home in a walkable neighborhood? Is the neighborhood in a good school district? Is the neighborhood zoned for the appropriate usage? Do homes in that neighborhood sell quickly for above asking price? Or do homes sit on the market for awhile and sell at a steep discount?
The more information we know about the neighborhood, the better we will know where to start the negotiations. If it is a desirable neighborhood that sells quickly, we’ll want to present a strong offer. If the home is in a tougher-to-sell neighborhood, our buyer clients will have the upper hand.
Great tools to research neighborhood characteristics include your local multiple listings service (MLS), CoreLogic, GreatSchools, CrimeMapping, MeetUp and Google Maps.
4. Online valuations
Yes, we want to use the Zillow Zestimate and as many other online valuations in our report as we can. We want to use online valuations because the consuming public is using — and trusting — online valuations.
When we integrate online valuations, we don’t want to just use one model. Just the opposite. We want to use as many valuation models as we can.
Why? The law of large numbers tells us that the more times we perform an online valuation, the closer and closer we will get to the correct valuation. That means we should be scouring and compiling as many data points (online valuation prices) into our CMA as possible to get a more accurate price.
Great tools to help you pull automated valuations include Zillow, realtor.com, Trulia, RPR and CoreLogic.
Some quick dos and don’ts
- Don’t send a client a price point and never follow up.
- Don’t send a report that’s a thousand pages long.
- Don’t send someone who is lacking in technology skills a digital report with random file types.
- Don’t worry about finding exact comparable properties. Close enough is good enough for horseshoes, hand grenades and home valuations.
- Don’t just use one online valuation model.
- Do use all the online valuation models you can find.
- Do share all information you find, even if it negatively affects your client.
- Don’t make assumptions. Better to leave blank than make something up.
- Create a follow-up plan for staying in touch with a buyer after you deliver your CMA.
If you want to make the real estate business your lifelong career, develop and implement a solid routine for presenting your buyer client with a comparative market analysis. The critical aspects you use in your CMA will help your secure buyer clients today and well into the future.
Nico Hohman is the broker-owner at Hohman Homes Real Estate Brokerage & New Home Consultants in Tampa-St. Petersburg, Fla. Connect with him on Facebook or Twitter.