Creating a CMA

REALTORS┬« approach the CMA process in a number of different ways. They use various software tools and assemble findings in anything from plain reports to impressive presentations filled with photos and jazzy graphics. The real value of the CMA, however, isn’t in the packaging (although a great looking report is almost sure to help you communicate your findings more clearly). In my opinion, the real magic of the CMA process is that, by gathering the data and making the comparisons, you develop your marketplace knowledge and your conviction and belief in your pricing recommendation. That knowledge and certainty translates to client confidence and wise decision-making.To prepare a CMA, follow this series of steps:o Choose your CMA software tools. Most MLS systems offer CMA software for use by agents. They also offer classes. I suggest you take advantage of any of courses that help you gain familiarity and skill with the programs.The software available through most MLS offices usually results in a basic CMA template. Your real estate company may provide software that results in a fancier presentation; if that’s the case, ask your broker or broker manager whether the company offers training. If so, definitely take advantage of it. Also, consult with a few other agents to learn what software they use to produce their CMA reports.o Develop your data-gathering system. Whether you decide to use MLS-provided software, company-provided software, or some other software tool, the outcome of your CMA really depends on the data you put into it.Follow these steps to create an information-development system that you can use over and over again each time you analyze the market conditions for a new property:1. Search for recently sold properties that are similar to the one you’re selling in terms of square footage, number of bedrooms and bathrooms, and garage size. In real estate lingo, these homes are called comps, short for comparable properties.You don’t have to find homes that identically match the offerings of the home you’re pricing. What you want to find are homes that bracket your offering by falling within a reasonable range of the home in terms of square footage and number of rooms. Once you have a number of comparable homes to review, you can then tighten the range and reduce the number of comps that meet your predetermined criteria.When I was preparing CMAs and needed to pare a number of properties under review, I’d tighten the range requirement by adding search fields. For instance, I’d add a screen for comparable homes in a certain school district, or even within the boundaries of a specific grade school. In some areas of North America, being within the boundaries of a certain grade school or middle school can significantly influence the value of a property, and therefore, I would often use grade school as a way to achieve an accurate CMA.If the home you’re selling has a particularly distinctive attribute, such as a very large yard or even acreage, add that feature to your search criteria in order to find comparable properties for analysis.2. Narrow your review down to 15 to 20 comparable homes and evaluate each property by comparing its features with those of the seller’s property. Make a list of similarities and differences3. Estimate the value of the seller’s home by comparing its features to each comparable home under review, applying pricing credits or debits based on the differences you discover. For instance, if a comparable property has one more bathroom than the home you’re selling but is otherwise comparable, debit the value of that bedroom from the comparable home’s sale price to arrive at a likely value of the house you’re selling.4. After completing a review and assessment of your seller’s home against the prices of recently sold homes, repeat the same process as you review comparable pending sales, active listings, and expired listings.Expired listings will likely comprise the smallest group of properties you review, but take special care to study each and every one. First, take time to see if the expired listing also appears on your list of recently sold, pending, or active listings. Frequently, you’ll find that a listing that expired under one agent or at one price was later picked up, re-priced, and re-offered by another agent. The difference between the selling price at which it became an expired listing and the price it is now listed or at which it finally sold provides a very clear indication of the home’s actual current market value versus the price that was deemed by buyers to be too high to accept.5. Once you’ve made a list of comparable homes – including recently sold homes, pending sales, active listings, and expired listings – select the best, most comparable four to six from each category for study, evaluation, and inclusion in the CMA report you will present to the seller. Your final selections should be very similar to the seller’s property, with differences reflected by reasonable credits and debits.6. Print out a complete listing for each of the properties you’ve selected as comparable to your seller’s home. You might not show each and every one to the seller, but you need them at the appointment in case you need further ammo to prove your point.From start to finish, expect the creation of a CMA to take you somewhere between a half hour and several hours, depending on your market area and the kind of property you’re selling.For example, say you’re listing a home in a production builder development where hundreds or even thousands of homes have been built, all featuring one of only six different floor plans. If your seller’s home is the “magnolia” plan, guess what? It’s going to end up with a price comparable to the price of every other magnolia home on the market or recently sold, regardless of differences in finish work, fixtures, carpet, tile, and landscaping. The magnolia plan will only sell for so much even if it has gold floors and gold toilets!In technical jargon, neighborhoods filled with similarly designed homes by the same builder are described as very homogenous. If you are selling homogenous properties, you can conduct straightforward, easy-to-execute CMAs in almost no time at all. But when you’re listing a unique property with no obvious equivalent in the marketplace, plan to invest several hours assembling a good-length list of comparables and then conducting follow-up analysis to arrive at an accurate pricing recommendation.

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