What is a Comparative Market Analysis?

A comparative market analysis is a tool used by real estate agents to determine an appropriate listing price for a home going on the market. To do this, real estate agents look at comparable homes in the same area that have recently sold, and use these as the basis to determine an appropriate price. Choosing comparable homes and acknowledging differences is crucial in calculating an accurate price.

How does a comparative market analysis work?

  1. It uses data from similar properties

    A comparative market analysis is only accurate if the real estate agent uses data from home sales that are similar to the property they are listing. Comparable properties are found based on a number of factors, including when the property was sold, where the property is located and characteristics of the home. If a home has been sold more than three months before, is in a different neighborhood, or has major feature differences, the real estate agent must take that into account and adjust to get an accurate comparative market analysis.

  2. It can include currently listed properties

    Real estate agents who want to be especially accurate will also check currently listed properties to get an even more accurate picture. This is especially helpful if there are few houses that have sold recently or few with similar characteristics.

  3. It is formulaic

    A comparative market analysis must be done using a formula. Not all analyses are done with the same formula, but a real estate agent must have a method for coming to their concluding price or value. Formulas take into account comparable list prices, number of bedrooms, bathrooms, and other features. Each feature represents a certain amount of money in the formula.

Why is a Comparative Market Analysis important?

  1. It is informative

    A comparative market analysis is informative to both buyers and sellers. Using a formula to come up with a number can give both parties a feel for what is a fair price, and why a seller has decided to list for that price. It puts everyone on the same page.

  2. It keeps everyone honest

    In America's booming housing market, homes values are rise and supply dips. This sort of opportunity can lead to inflated prices. A comparative market analysis can ensure a home price stays accurate to the market around it. Additionally, our increasingly tech-savvy world means more home shopping is done online. Glamorous photos and elaborate descriptions can entice buyers who aren't physically present. A comparative market analysis keeps the listing price accurate.

  3. Its informational

    A comparative market analysis is one of the most accurate tools for a buyer or seller to understand the value of a home. It compiles more details and specifics about a home in a single document, than almost any other tool or report out there for home buyers and sellers.