Comparative Market Analysis (CMA)

If you are a Seller, the real estate agent might bring a CMA or Comparative Market Analysis to show you what houses in the market are listed for or selling for, when you are listing your home. If you are a home Buyer, a real estate agent might also use a CMA to show you the worth of home based on the market. The CMA is a helpful tool to both Buyer and Seller because the market is what dictates what a home is worth.

The reason this is important is that a home will be appraised at closing. If a Seller lists a home too high based on what he owes or would like to profit, they have to keep in mind that a Buyer will look at other properties in the area that are similar and the Seller will price themselves out of the market and chances are slim they will sell the property. If you are a Buyer and love a house so much that you are willing to pay more for a specific home, you may have to come up with the difference between the appraisal and negotiated price, unless the Seller is willing to come down to appraised value.

With a CMA, you are getting a good idea of the same homes that an appraiser will use, when appraising the home. You can waste a lot of people's time, including your own if you are trying to sell your home above the market, or trying to buy one that is overpriced, because a lender will only loan a certain percent of appraised values. Many real estate agents don't want an overpriced listing and many real estate agents won't show it to Buyers, unless it has something extraordinary that a Buyer would be willing to pay additional cash out of their pocket for.

A CMA is used as a tool by everybody throughout the real estate process, including the Seller, REALTOR®, Buyer, appraiser and lender. This same tool is used by everybody to analyze the entire process, even though it might change slightly from the time a property is listed until it is sold and appraised, because some competing Sellers may lower prices or houses might sell.

Many Sellers price a home based on what they need instead of what the market will bear. Right now, those numbers don't usually coincide and there are many homes on the market, including foreclosures and people that are willing to take a loss because they have lost their jobs and can't afford the payments. Unfortunately, many Sellers and mortgage holders have to sell homes on a "Short Sale." In Canada there are very few lenders who will allow you to sell your home as a "Short Sale.

What this means is that the lender has agreed to take less than is owed just to avoid foreclosure. Usually, this is meant to help the Seller keep their credit somewhat in better shape than a foreclosure and the lender can get market value for the home, even if less than owed. Because the Comparative Market Analysis is an important tool to everybody in a real estate transaction, all parties need to understand it represents the real estate market which changes based on supply and demand.

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