As you embark on the journey to sell your home, you will be introduced to the comparative market analysis (CMA). The CMA will give you an idea of the market climate and since home selling does not happen in a vacuum, it is important to understand the competition and how you can competitively position your home in the market. If you are not utilizing the CMA as a tool in your home selling process then you need to be.
WHAT IS A COMPARATIVE MARKET ANALYSIS?
A CMA is an in-depth look at homes similar to yours in size, location, condition, and amenities that have sold within the past 3 to 6 months. This analysis is a regular part of CNG Group’s service to you and is always free of obligation and charge. A successful CMA provides the home seller with an accurate price range for the home to sell – how long it takes to sell depends on which end of the price range you choose.
Here are 3 ways a CMA helps you sell your home:
1. PROVIDES MARKET INSIGHT SO YOU CAN RESPOND TO OFFERS INTELLIGENTLY
Today’s market is continuing the past year’s shift toward sellers. The inventory is shrinking as sellers sit on their property investments and lending practices are still tight from the housing bubble burst. Selling a properly priced home in this climate will almost surely inspire a bidding war, so you should know the market trends before responding to an offer. Your agent will include listings that are currently active on the market.
Although this won’t help you price your home as these asking prices may be wishful thinking, it will help you get a feel for what prices you are competing against. Expired listings, or homes that don’t sell in the listing agreement’s allotted time, should serve as a warning to you. Most likely, these sellers did not take their homes’ CMA seriously. They priced outside of the market and so did not receive offers within their expectations, if they received any at all.
2. PRICE YOUR HOME TO SELL AS FAST OR SLOW AS YOU WANT
Your agent will include an upper and lower price limit of what she has determined as appropriate for your home. This number is based on the analysis of sold listings similar to yours in size, amenities and location and the agents understanding of the local real estate market. If you choose an asking price on the high end of the CMA’s price range, you may have to wait longer to sell your home. This is ideal for sellers that are in no rush to sell their homes, especially if they are in the midst of a seller’s market as we are now. There may be fewer bidders but they will probably be more serious bidders.
If you are like most sellers then you want to get your home on the market and sold ASAP. Choosing a price near the lower end of the price range will ensure you sell your home as quickly as possible. More buyers will look at and consider your home because they will see it as a bargain compared to other, similar homes. Keep in mind that an overpriced homes, if an offer is accepted, will not appraise and therefore won’t sell. You don’t want that to happen to you so make sure you understand the CMA and it’s results to you before you decide on an asking price. Don’t be afraid to ask your agent for clarification.
3. UNDERSTAND BUYER BEHAVIOR IN THE CURRENT REAL ESTATE MARKET
If buyer interest is driving up prices or is practically non-existent, a CMA will tell you about it. Each home listed in the CMA should show the number of days on market (DOM), how long a home has been or was on the market. The fewer DOM, the better in most cases. However, a home that sells very quickly, especially if it’s a buyer’s market, might mean the home was priced too low. A CMA also includes the asking price and final sale price of sold homes.
By comparing these two prices you’ll see how interested buyers are in actually purchasing as well as how much they are willing to pay and how much they are able to borrow. This is crucial information for you as you decide where to price your home. If buyers are not driving prices up, then you know you’ll have to struggle to gain their attention, which means a lower price may be necessary.
Of course, as the home seller, you have the final say on an asking price. That can mean completely ignoring the CMA, but you do so at your own risk. An overpriced home has a high risk of expiring, and a re-listed home becomes much more difficult to sell. Any agent can see what transpired and it inspires questions of problems with the home or property. The risk of underpricing is obvious: losing money.