What’s a CMA & Why Do I Need One?

home-valueIf you’ve been considering selling or refinancing your Miami home, you may have had a real estate agent offer you a CMA. So what’s a CMA and why do you need one anyway?

A CMA is a Comparative Market Analysis and, if done correctly, should provide you with a good idea of what your home is worth. It usually gives a range, not an exact amount.

A CMA is not an appraisal nor does it take the place of one. There are cases where an appraisal is needed and Realtors are not licensed to appraise a home (unless they are actually also licensed appraisers). My real estate license allows me to provide an approximation of value, but I cannot call it an appraisal, because it isn’t.

When thinking of selling your home, a CMA is usually adequate for putting the home on the market at an appropriate price. In some cases, I do reccomnend that an appraiser be hired to perform a bonafide appraisal.

What exactly does a CMA consist of? It provides market data on homes that are similar to a subject property. We look for market data on:

  • Active listings – this shows us the prices similar homes are listed at.  We like to think of these as the competition because that’s what they are.
  • Pending listings – these are the similar homes that are under contract, but haven’t closed yet.  While we won’t know the sales price on these until they close, it still provides important information such as list price and Days On Market.
  • Closed sales – while we look at all data, of the three statuses, this is the most important.  It shows what a buyer was actually willing to pay for a similar home.  As I like to say, “money talks, and dreaming walks.”  It’s important to note that depending on the market, we might look back only 3 months, or as far back as a year.  There are many factors that affect this, and a good agent can provide valuable insight.

Of course, when looking at homes, you will never find two that are identical.  Even if they were physically identical, their location is different and location can affect price dramatically.  For these reasons, we make adjustments to the prices of the comparable homes to make them as similar as possible to the subject property.  For instance, if I home is pretty similar to the subject but has an extra bathroom, we would have to reduce the price of that home by an amount of X to account for the fact that the subject property does not have that extra bathroom.  Same thing for pools, garage sizes, bedroom counts (although we do strive to use homes that have same bedroom counts whenever possible), square footage, lot size, location and others.

Basically we work to adjust so we are comparing apples to apples.  A good real estate professional will have a good grasp on adjustments and should be able to give you a range of what your home is valued at at that point in time.  Please keep in mind that this is fluid information.  Exactly like a home appraisal, the market value will most likely be different as early as 6 months later.  Think of it like the stock market, only not as volatile.  Stocks go up and down many times during the day.  Homes do not, but you get the picture.  I’ve seen listings that make reference to “listed below appraised value” and when I inquire as to the appraisal I find out that it was done a year before.  Yikes!

If you’re looking to get an idea of what your home in Pinecrest, Palmetto Bay or the surrounding area might be worth, contact us and we’re happy to provide this complimentary service without any pressure or hassle.  Free. Gratis. Zip. Zilch. Nada.  We’re here to help.

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These articles are not intended to give legal or tax advice, and you should consult your attorney or financial advisor for additional information.

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