Or, learn how a CMA is prepared, below!
If you've sold a car you had to find out what people were willing to pay for it, by checking the Blue Book or used car ads. After some quick research you set a price that potential buyers will find attractive. It's pretty simple and does not require any special expertise.
Pricing your home is not so simple. Market value is much more difficult to predict and the information available from friends, relatives, co-workers, or the internet, can be unreliable. Lenders, lawyers and other professionals play an important part in the process, but relying on their 'opinion' about the value of your home can be a costly mistake.
A properly prepared CMA can take several hours, but is usually provided at no charge to the prospective client, providing a great opportunity to meet and get to know your agent.
Beware of agents looking to list your house without preparing a complete CMA, perhaps pulling a number out of thin air, or quoting some statistics without backing them up. Even worse, is the agent who simply agrees with the home owners price, just to get the listing! Your agent should be able to show you right from the start that he or she has the knowledge and understanding of the market to properly price your home. First, an agent will walk through your home. The home does not have to be in perfect condition, but it should be clean and in the condition a potential buyer will see it in.
The agent will measure, take photos, and ask some questions. Don't feel put off if your agent seems pre-occupied as you tell the story of the funny lamp on the coffee table. Your agent has a big responsibility and will be focused on the task at hand; gathering enough pertinent information to accurately assess the market value of your home.
Second, the agent will research comparable properties in the area, primarily those properties similar to yours, geographically nearby and most importantly, having closed within the last 6 to 12 months depending on the market conditions. Closed transactions are most important because unlike active list prices which can be all over the place, closed transactions tell the truth about what people are willing to pay for a home like yours. There's no fluff, no bargaining margin, nothing but one simple number ...the price at which the buyer is willing to pay.
A completed CMA report is presented, which includes an extraordinary amount of information about the properties that have sold, and the various criteria that were cross checked to arrive at a probable selling price for your home. In most cases, if the closed properties (comps, as they are referred to) are similar enough or recent enough, they will form the entire basis of the report, along with some notes from the agent, and some pricing suggestions.
However, in some cases, the agent may feel it necessary to examine some other types of comps, although they will usually carry less weight than the closed comps. For example, in a declining market the CMA may predict a slightly higher price based on prior closings, but your agents market knowledge may suggest otherwise. In this case, your agent may pull some active comps to ensure you're listed price is not near the top of the active range for your property type. In most cases you should be priced near or below the middle of the range for a reasonably fast sale. Expired listings are the least often examined but can be useful in determining at what price similar homes simply expired due to lack of interest at a particular price range.
The most important part of your CMA, is the probable selling price. This is usually presented as a price "range", with a recommended target price. From this target you will set your listing price, which depending upon the market, your agent will recommend the spread between the selling price and the listing price.
Remember, your real estate agent is a trained professional, often with hundreds of hours of class time, and sometimes just as many closed transactions under his or her belt. You are probably very good at your job, but how many homes have you successfully priced and sold? Listen to your agents guidance. When selling your car, an incorrect price might cost you a few hundred dollars. If you set the wrong price for your home, you could lose tens of thousands of dollars by under OR over-pricing your home. Do your homework and ask a real estate professional for a Comparative Market Analysis to ensure you get the most value for your home.
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DANIEL PENA
Licensed Real Estate Agent Salesperson
Douglas Elliman Real Estate
516.327.6432 Direct
516.967.2554 Cell
390 Franklin Ave. Franklin Square, NY 11010
Servicing Queens and Long Island
Email: Daniel.Pena@elliman.com
