A good comparative market analysis template is very helpful, especially when looking for investment properties. Learn how to create one here.
Table of Contents
- Comparative Market Analysis in Real Estate: What Is It?
- Comparative Market Analysis vs Property Appraisal
- Importance of Comparative Market Analysis Template in Real Estate
- What Should a Comparative Market Analysis Template Contain?
- The How-tos of Running a Comparative Market Analysis
- Wrapping It Up
While real estate professionals use a comparative market analysis template for their business, home sellers on a budget will benefit from learning how to come up with their own CMA templates.
What does CMA stand for? CMA is an acronym for comparative market analysis. A term used in real estate, it is the property valuation method real estate professionals use to estimate the value of residential properties.
In this article, we will discuss what a CMA is and how the average Joe wanting to sell a property can make a good comparative market analysis real estate template.
Comparative Market Analysis in Real Estate: What Is It?
Comparative market analysis, better known as CMA. What is a CMA in real estate? Why is it important in the real estate industry?
Generally, homeowners and real estate agents looking to sell properties need to determine the property’s current market value before getting it listed on the multiple listing services. Determining a property’s actual worth is crucial in the industry. And while an appraisal helps get the job done, experienced real estate professionals and home sellers know that a real estate comparative market analysis template is needed to get an accurate property valuation.
CMA real estate is basically a far more accurate method of determining a property’s current market value based on similar properties that recently sold in a specific neighborhood. Regardless of whether the property is intended to be sold as residential property or income property, a comparative market analysis CMA real estate template gives potential buyers a deeper insight into the subject property and the real estate market it is located in.
A real estate comparative market analysis Excel template, Google Sheets, or even a conventional accounting ledger, is crucial for listing agents and brokers. They use the tool to determine the prices of new properties going up for sale, as well as to advise their clients to make competitive offers.
An agent or seller who knows how to make a comparative market analysis template Excel or Sheets enjoys an edge over the competition. It shows a certain level of knowledge and expertise, as well as professionalism, especially when the comparative market analysis template presented is accurate and well-prepared.
Related: Comparative Market Analysis: A Real Estate Agent’s Guide
Comparative Market Analysis vs Property Appraisal
A lot of people use the terms comparative market analysis and property appraisal interchangeably because they think both are the same. Although they seem to be very similar to each other, there are subtle differences between them.
A comparative market analysis template is used by real estate agents to determine a property’s fair market value. An appraisal (which is necessary for bank transactions), on the other hand, is performed by a licensed appraiser to assess a property and its surroundings to come up with a fair valuation. The two methods don’t necessarily arrive at the same figure.
A CMA usually produces a general estimation of prices, while the latter is more of an exact science. A property owner looking to sell can take on home improvement projects to increase the property’s value for an appraisal. However, the same efforts don’t affect a CMA, which is done using publicly available information and data.
Importance of Comparative Market Analysis Template in Real Estate
As we’ve already mentioned earlier, a comparative market analysis template is very useful in a real estate transaction as it produces a fair valuation of the subject property. A seller who knows how to use a free real estate comparative market analysis template or even create one can see increased chances of getting listed and sealing the deal with a prospective buyer.
Since it is a slightly sophisticated and complex process, a person engaged in developing and using a CMA gains technical knowledge about the industry and a greater understanding of the real estate market the subject property is in. It also helps sellers and professionals understand how the different aspects of the real estate market affect and impact a property’s worth.
What Should a Comparative Market Analysis Template Contain?
While most real estate agents can easily generate a comparative market analysis template using software like Excel and Sheets, regular homeowners who lack industry experience and know-how can easily come up with their own CMA or use a free real estate comparative market analysis template available online.
A sound report typically uses at least three real estate comps to compare the subject property to come up with a reasonable valuation.
What does comps mean, you may ask? Comps, a shortened form of the word comparables, basically just pertains to other properties within the same neighborhood with the same qualities and features as the subject property. Let’s say you’re looking for investment properties for sale, one of the things an investor should always look for is how many other similar properties were sold in the area. It gives them a good overview of what the market is like and an insight into whether a property is worth buying or not.
Similarly, when considering prices for a duplex for sale or whatever type of property you own, it is wise to always consider real estate comps before putting a price tag on your property. Doing so will help you come up with a fair and competitive price for your property, given its conditions and location. It will help generate good leads for your property and help you avoid undervaluing your property.
Related: How to Find Real Estate Comps Most Effectively
That being said, what should a good comparative market analysis template contain? Here are the most important elements that need to be included in any CMA report:
When it comes to online selling, like on eBay or Mercari, the item’s description is very important. A well-described item for sale builds greater trust in the seller, especially if it includes all the details buyers should know about the product.
It’s pretty much the same when it comes to selling a single-family home, a condo unit, a townhouse complex, or an Airbnb property. A property with a well-thought detailed description is more likely to attract buyers and investors compared to one that only comes with the bare minimum.
Among the important details that should be included in a CMA are:
- Location (Address, street name, neighborhood, city, county)
- Square footage
- Bedroom and bathroom count
- Year the property was built
- Home improvements and repairs done since it was last sold
- Notable interior and exterior finishes
- Notable features such as pool, jacuzzi, roof deck, barn, basement, and other similar features
- Property’s tax history
As we’ve already noted above, the property’s size should be indicated in the CMA as well. When we talk about the size, we mean the total square footage of the property and the total floor area of the habitable structures. You can also include the dimensions of the subject property to give buyers and investors a better idea of its layout.
Remember the real estate comps we were talking about earlier? To justify the value of your property, you need to present the prices of the comparable properties that were sold recently in the area. It includes the sold price of each real estate comp, the adjustments made, and the sold price by the square footage.
Lastly, once you’ve listed all of the details, indicated the property size, and shown the different prices the other comps sold for, you must put the subject property’s estimated fair market value in your CMA report.
When it comes to valuation, you can consider looking at the real estate market a property is in. A real estate website like Mashvisor keeps a fairly accurate database that pretty much covers the 2022 US housing market. All you need to do is log onto the website and utilize its real estate investment tools like the Real Estate Heatmap and Investment Property Calculator.
Mashvisor’s Real Estate Heatmap allows users to see how certain properties and neighborhoods are performing under different categories like property prices, traditional or Airbnb rental income, traditional or Airbnb cash on cash return, and Airbnb occupancy rate.
Users can easily change the filters by clicking on the Heatmap Data Set dropdown menu found in the upper left corner of the map. Selecting a filter will show users how certain properties are doing in the neighborhood given the chosen filter. The tool functions like a weather map that shows which areas are doing very well (highlighted by the color green), the ones that are doing very poorly (colored red), and everything in between.
The website’s Investment Property Calculator, on the other hand, allows its users to crunch the numbers and make sure that the calculations check out. It not only does the math for users, but it also helps them locate the suitable properties that line up with their needs and criteria. Property sellers can use the tool to figure out the right numbers and make more accurate projections.
To learn more about how Mashvisor can help you find profitable investment properties, schedule a demo today.
The How-tos of Running a Comparative Market Analysis
A homeowner looking to sell their property can just easily hire a real estate professional to prepare a CMA report for the subject property. Hiring a professional helps ensure higher accuracy of property valuation. However, sellers who are on a tight budget can perform their own CMA using public data and a spreadsheet with the following steps:
Step 1: Gather as Much Data as You Can About the Subject Property
Since the main purpose of a CMA is to compare properties, you will first need to gather as much information about the subject property. Doing so will give you a better idea of which real estate comps to look for and use for your analysis.
Most of the important details can be easily found on the multiple listing services, tax and county records, and from the property owners. Owners, especially, possess greater knowledge compared to the MLS or tax records, so make sure to ask them about everything you need to know.
Once you’ve already gathered all the details that you can about the property, you can start looking for similar properties that recently sold or are currently listed. Obtaining all the relevant property details will enable you to make better comparisons.
Step 2: Consider the Subject Property’s Previous Listing Data
If you’re looking for what the market offers for you, there’s no better place to look than the market itself. When considering property prices, look at the property’s listing and sales history to determine a good starting point. It will include factoring in the market’s overall movement since the last time the subject property was sold.
For instance, let’s say you’re looking to sell an Orlando FL property that you bought in January 2022 when the median price was $426,921. According to Mashvisor’s May 2022 data, the median price for an Orlando property is currently $449,831. Based on the numbers, there is a $22,910 difference between January 2022 and May 2022. The 5.37% increase will help dictate your property’s current market value.
Step 3: Look for Other Similar Properties both Recently Sold and Actively Listed
Once you already know the difference between the original price and the new market price, you still need to consider how other similar properties performed (or are performing) in the market you’re in. More than getting an idea of what the supposed market value of the subject property is, obtaining relevant sales comps will make your CMA highly accurate.
When looking for comps, here are some things to consider:
- It has been sold within the past 12 months or is actively listed on the market;
- It is located in the same vicinity as the subject property; and
- It has been closed within a reasonable period and sales term.
Ideally, a good CMA should have around three to five comps to increase the level of accuracy of comparative market analysis.
Step 4: Make Adjustments for Certain Property Differences and Neighborhood Trends
Awareness of micro-market trends is also a plus when it comes to creating a good CMA. “Micro market trends” is just a fancy way of saying what’s going on in the neighborhood.
For instance, a distressed commercial property was recently demolished along the street of the subject property. While under normal circumstances, the price range in the neighborhood is above average, the demolition project and the unpleasant aesthetic it lends to a location will impact the subject property’s valuation.
Related: Neighborhood Analysis in Real Estate Investing
Step 5: Put Them All Together in a Final Product
Once you obtain all of the information you need and all the numbers figured out, you can then compile them all into your report.
Start with the property’s history including all the detailed descriptions, as well as the changes in prices. Afterward, present your recently sold comps and active listing comps.
If you did your research thoroughly and correctly, you should see a common trend with all three numbers (sales history, sold comps, and active comps). Arrange the three numbers from lowest to highest so you get a conservative, moderate, and aggressive value for your property. Apply the smaller market trends to your predictions for a more accurate projection.
Based on the figures, you should be able to come up with a fair market value for the subject property. If the differences between the numbers are a bit farther apart, reevaluate the comps you used. Perhaps they’re not as similar as you thought they would be. It’s either that or you made an inaccurate estimation of the market’s movement since the property’s last sale. Just redo the steps and see if you can find better real estate comps or better market data.
If you performed all five steps correctly, you’ve just successfully completed your very own comparative market analysis template. All you need to do now is put them all together into one pleasant presentation to show potential buyers and clients.
Wrapping It Up
Learning how to create and use a comparative market analysis template may take some time but once you get the hang of it, it’ll be smooth sailing. The more you do it, the easier it gets.
The important thing is you’re able to access the most accurate and up-to-date market data and real estate comps. For this, you can always go to Mashvisor for the most reliable data and real estate comps, as well as the right tools to help you perform neighborhood real estate analysis more efficiently.
To get access to our real estate investment tools, click here to sign up for a 7-day free trial of Mashvisor today, followed by 15% off for life.