by Angela Brown

Created on: October 28, 2008

The Value of a CMA

One of the most contentious issues between sellers and realtors is determining the listing price of a home. Realtors use a tool called a Comparative Market Analysis (CMA), which compares the seller's property to similar properties that have sold in the area within the past year. Ideally, the result is a listing price that attracts buyers and sells the property within a reasonable amount of time.

All buyers and sellers should get a CMA, period. Without one, you're basically playing a guessing game, which can cost you dearly in terms of time and money.

A CMA, when done properly, compares apples to apples. You obviously wouldn't compare a "handyman's special" to an estate home. Comparables should be similar in size, square footage, age, condition, location, etc. CMAs are flexible, however, and that flexibility can lead to problems.

By far the biggest problem Realtors encounter is that sellers don't always agree with the comparables. Here's a typical scenario:

Dave is hoping to sell his house within the next three months. He's relocating out of state for a new job. Dave calls a Realtor to list his home, and the Realtor suggests doing a CMA.

The CMA recommends a listing price of $179,900 for Dave's three bedroom, 1 bath ranch.

Dave balks at the price. He paid $150,000 for the home almost three years ago, and spent at least $50,000 remodeling the kitchen and updating the bathrooms. He wants to list at $205,000.

The Realtor points out that similar homes in Dave's neighborhood have sold for $150,000 to $175,000 in the past year. All have had upgrades similar to Dave's. She advises him to stay around the CMA price if he really wants to sell his home within three months.

Dave is adamant. He thinks his upgrades are "better" than those in the other homes, and insists that the Realtor list the home for $205,000. The Realtor complies.

Six months later, Dave's house is still on the market. He has since relocated, and is now paying two mortgages. Meanwhile, several homes in his neighborhood that were priced competitively sold within several weeks.

So what can sellers learn from Dave?

The CMA works. It compares homes point-for-point and it's a great way to eliminate pricing "guesswork". Dave ignored the CMA and went with what he "wanted" to get for his home. But why would anyone pay $205,000 for his home, when others in Dave's neighborhood with remodeled kitchens and upgraded baths were available for $150-$175,000?

Don't let purchase price dictate selling price. Dave may have overpaid for his home in the first place. The market conditions may have been different three years ago. All of those points are taken into consideration in the CMA.

Don't let emotion cloud your judgment. Your memories are precious to you, but unfortunately they add nothing to the value of your home. Likewise, by deciding that his upgrades were "better" than the other homes, Dave priced himself right out of the market.

Being inflexible can cost you dearly! Dave is already depleting any profit he would have made on the sale of his home by paying two mortgages, property taxes, etc.

Be sure to contact your local Realtor and ask them about performing a CMA for your property. A competitive asking price is the first step in ensuring that your home attracts buyers and sells within a reasonable amount of time.

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