Understanding The Role of Comparative Market Analysis
Whether you are a real estate agent, seller, first home buyer, or an investor, comparative market analysis (CMA) plays a vital role in a successful property transaction. Comparative market analysis also known as real estate market analysis is a must-do exercise before buying or selling a property. Wouldn’t you like to improve your client’s experience as a real estate broker or wouldn’t you like to maximise your profit by selling a property, or wouldn’t you like to buy a property at the lowest possible price as an investor? The blog may help real estate brokers, first home buyers, and investors alike to understand the vital role of comparative market analysis in satisfactory property transactions.
What Is Comparative Market Analysis (CMA)?
The comparative market analysis is a data-driven analysis of the current market worth of properties similar to a property you are looking to sell or buy. Also called real estate market analysis, CMA acts as a crucial tool helping seller agents, buyer’s agents, and investors to determine the justified price of a property by comparing it to similar properties in the same or surrounding areas. CMA provides up-to-date insights into the current market trends, property values, and the competition intensity in a particular area.
Why Should You Conduct a Comparative Market Analysis (CMA)? Role of CMA in Real Estate Transactions
Real estate brokers create reports to help sellers fix the justified prices for their properties which helps buyers to make competitive offers. CMA helps buyers to evaluate the asking price. The key reasons that make comparative market analysis a must-do exercise before selling or buying a property also include:
- It helps to whether you should invest in a particular location or not
- It helps to identify elements that can hinder the growth of your investment in a particular area
- It helps to understand demographic aspects to determine the investment growth potential in a particular area
- It helps to get updated information about the upcoming projects and developments in a particular area and to assess how the development will improve the investment growth rate
- It helps to understand whether the target area is a buyer’s marketplace or a seller’s marketplace
- It helps to understand what features and amenities improve the worth of a property
- It improves satisfaction of getting the best deal without worrying about overpaying or selling at a comparatively lower price
- It helps sellers determine a competitive yet realistic selling price for their property avoiding risk of risk of either undervaluing the property leading to a profit loss, or overpricing it resulting in the property lingering in the market
- It helps buyers make an informed decision based on actual market data improving the scope for negotiation
- It helps investors to identify potential risks associated with a property. For example, if the CMA report shows that a property is staying in the market for a long, it indicates a market slowdown or a potential oversupply of properties of that type.
- It helps investors find less-explored investment opportunities. For example, if the CMA report shows that the demand for a particular type of property in a particular area is increasing, it indicates a high potential for property value appreciation.
To get a more beneficial CMA report, you should know what it should include. The inclusion of all the critical elements makes the comparative market analysis report more effective in helping you make better-informed decisions to sell or buy a property at a justified price.
What is Included in Comparative Market Analysis? Five Essential Elements of a CMA Report
When you hire a prominent seller’s agent/ real estate broker to get a comparative market analysis report helping you to decide sell or buy a property, you should focus on the following five elements-
1. Property Information: The CMA report provides detailed information about the property including the property’s size, location, number of bedrooms, number of bathrooms, and other features that affect its value. This section also includes the property’s age, condition, and recent renovations or repairs.
2. Comparable Properties: This section of the CMA report provides a detailed analysis of comparable properties in the same area with an objective of comparing the subject property with similar properties that have recently sold or are currently on the market. Real estate brokers use this information to determine the fair market value of a property.
3. Current Market Trends: The section of the CMA report provides insights into the current market trends informing about the recently sold properties, the average sale price, and the average staying time of properties on the market. This data helps investors determine the growth potential in the local real estate market.
4. Competition: Real estate brokers use this information to determine the property’s competitiveness in the market. This section of the CMA report provides a detailed analysis of the competition in the area. This includes the number of properties currently for sale and the average list price.
5. Estimated Value: This section of the CMA report provides an estimated value of the subject property based on the collected data for this particular task. The estimated value helps buyers to fix the last price they may quote as well as it helps sellers to judge the maximum profit that they can generate by selling their properties.
Performing an objective-oriented CMA needs a careful blend of quantitative analysis and qualitative assessment; it’s about making sellers and buyers able to understand the data and the nuances of the real estate market. Therefore, comparative market analysis reports, prepared by only a reputed and experienced real estate broker following all the standard practices, can be trusted to decide right with boosted confidence.
How Comparative Market Analysis Is Conducted? Is CMA Effective in Making a Profitable Real Estate Deal?
Conducting a comparative market analysis is a systematic process. It involves gathering, analyzing, and comparing various data collected from different sources. The prime objective is to determine a fair market value for the property that could help both buyers and sellers the make right decisions. The standard process of conducting comparative market analysis involves-
- Gathering Data from Multiple Sources: Identify comparable properties and using various data sources
- Analyzing & Comparing Data: Examining Sale Prices of comparable properties in the area, analysing Market Trends, and assessing Property Features
- Adjusting for identified Differences in Properties: Adjusting the value of the comps to account for differences, calculating an adjusted sale price for each comp
- Determining Current Market Value: Analysing adjusted prices considering the context, Finalizing the justified value
How to Get a Trustworthy Comparative Market Analysis Report?
Getting an objective-oriented fair comparative market analysis report requires you to involve a reputed real estate broker. Vasttu Real Estate has years of real estate industry experience in providing unparalleled knowledge and insight into every transaction up to your interests- selling, buying, or long-term investment. Vasttu Real Estate may be a trusted ally in navigating the dynamic world of real estate in Australia by having fact-based comparative market analysis. Book your free appraisal online today with CMA experts or call 0402 427 455.
