Comparative market analysis: How will it help me?
Looking into what a comparative market analysis is, how to do it and whether it's the best kept secret to a fast house sale...
We all know when deciding to put our house on the market with an estate agent, they’re going to give you a valuation on what they feel your property is worth.
How they came up with this price is less known, leading you to wonder, have they picked this price out of thin air? Or is there some reasoning behind it?
You’ll be glad to hear there’s some ‘method behind the madness’ and that method is called comparative market analysis.
‘What’s that?!’ you’re thinking to yourself.
Wonder no more - you’re in the right place to find out!
We’re going to talk you through comparative market analysis, explain how to do a comparative market analysis and answer the important question of whether it’s the secret to a fast house sale…
What is comparative market analysis?
Comparative market analysis, or CMA for short, is a sort of report created by your estate agent, which contains information about selling prices of houses which are similar to yours, within a similar area. The idea is to make a list of comparables, or ‘comps’, to help calculate what sort of asking price you should set for your house.
The basic idea of doing a comparative market analysis is to calculate the value of a property based on the average price per square foot or price per square metre of similar, recently sold properties within the same area.
The comparative market analysis won’t be 100% accurate, as it’s based on valuations and sold prices of other properties but is a useful tool for estate agents when trying to decide what price you should set your property at for it to be realistic and have no issues selling.
People often like to get a comparative market analysis because they think it will give them the most accurate price for what their house is worth, making it look better priced on the market, which should hopefully lead to a faster sale.
What’s in a comparative market analysis report?
Address of the property and three to five comparables
A description of each property, including floor plan, number of bedrooms and bathrooms
The square footage of each property
The sales price of each comp
Adjusted sold price per square foot of each comp
Fair market value of the property which is wanting to be sold (Fair market value means the price an asset would sell at on the open market when certain conditions are met. These conditions are all parties involved are aware of all facts; they’re acting in their own interest; there’s no pressure to buy or sell and they have lots of time to make a decision)
What is the difference between an appraisal and a comparative market analysis?
Comparative market analysis is carried out by an estate agent when trying to determine the asking price of a property. An appraisal is done by the bank when a buyer has applied for a house repayments, to ensure the value of the property matches with the amount the bank is lending.
The main aim of an appraisal is to ensure the bank isn’t lending too much on a property and, if the buyer were to default on their payments, the bank would be able to sell the property and make back the loan amount.
Comparative market analysis results in a ‘ball-park figure’, created by an estate agent as a result of looking at what’s on the market or what has recently sold.
An appraisal is done by a licensed professional and is more specific than a comparative market analysis. An appraisal is also done by someone who is ‘detached’ from the property, meaning they have no interest in what the property price comes to.
This differs to a comparative market analysis because an estate agent’s commission relies on the price the property is valued at and they may be aware several estate agent’s will be doing this analysis for you and so value your property higher than its worth, to entice you to market with them.
How to do a comparative market analysis
Now we have you curious about how estate agents use a comparative market analysis, you may be thinking about doing an analysis of your own, just to make sure you’re getting an accurate price for your property.
If that’s the case, you’ll be needing to know how to do a comparative market analysis which, lucky you, is what this section is all about! We’ve made a simplified step by step guide to help you become a CMA pro in no time:
1. Evaluate the surrounding areas
When trying to determine what the asking price should be, the surrounding area of the property is a key factor.
The comparative market analysis will take into consideration the general quality of the neighbourhood and whether your property is in the ‘best part’ of an area.
For example, if your property is next to a busy road, meaning loads of road noise, but further down your same road the properties are away from the road, meaning no noise, then your house is going to look less valuable in comparison, meaning the CMA will put your house at a lower price
2. Gather details about your property
Whether this is from previous, or current, listings or an estate agent coming round to view the property, information will need to be gathered about the size of the home, including information on the quality, the layout, construction, etc
3. Select comps
Around three to five comps, or comparable, will be selected which have sold recently in the area/as close as possible.
The best comparable will be one which is close by, similar size and layout AND has sold recently, as market prices can fluctuate over time and so the more recent, the easier it is to judge
4. Adjust for the differences
Naturally, there will be differences between the comps and your home, as every home is different. Even a house built exactly the same in terms of construction will have different layouts or décor.
Differences are made in terms of monetary value and so if, for example, a comp has an extra bedroom, it’s assumed the buyer had to pay more to get this, meaning your home will have some value ‘knocked off’ in order to adjust for the difference
5. Determine the sold prices per square foot after the adjustments
Once the differences have been adjusted, the adjusted price of each comp will be divided by the square foot to determine the sold price per square foot.
Then the sold price per square foot of all comps will be added together and then divided by the number of comps to get the average. The average is then multiplied by the square foot of your property to find the market value according to comparative market analysis
How do I get a comparative market analysis on my home?
To get a comparative market analysis on your home, you will normally be able to get one from the estate agent (or estate agents) that you’re looking to sell your property with.
If you’re wanting to sell without an estate agent, then you will need to look at other ways of getting a comparative market analysis. For example, some websites will offer CMA information for free or there are some websites where you can purchase a CMA report.
Who typically prepares a comparative market analysis?
As we mentioned earlier, if you’re selling through the open market, a comparative market analysis will be done by the estate agent you’re looking to sell with. If you’re looking at different estate agents, then each one should do it and provide you with their findings.
However, we know not everyone wants to sell with an estate agent, or on the open market at all, meaning you may need to conduct your own comparative market analysis.
You can go to websites, such as Property Data, who can provide you with all sorts of information that you will need for your own research. For example, you will be able to find comparable in your area, a rough housing valuation, sold prices near you and more.
If you don’t want to pay to use a site like this, you can do it for free using your own calculations and searches. You can attend viewings of nearby properties and use sites, like Rightmove or Zoopla, for sold prices in your area, but there’s no guarantee these sold prices will be recent or accurate.
Also, it’s important to remember that just because a property is in a similar area to yours, doesn’t mean it will be of the same standard, size or other factors which are used to dictate asking price.
Is comparative market analysis the secret to a fast sale?
Some may say that comparative market analysis is important in getting a fast house sale, as the report is good for getting a suitable asking price for your property, which should be able to help towards a fast house sale, as buyers shouldn’t be put off by price.
Comparative market analysis can also help you to get an idea of what the open market is like in terms of how many properties are available which are similar to yours and whether or not properties are selling quickly on the open market.
However, there’s no guarantee that by conducting comparative market analysis you will be able to get a fast house sale. Also, if you want to sell your property without an estate agent, CMA is difficult to conduct by yourself and there’s no way of telling you have done it correctly, as it can be quite subjective.
This leaves you with the question – are there any other ‘secret ways’ to get a fast house sale?
Yes – you have the choice of going through an auction or selling to a ‘quick house sale’ company…
At auction you will get serious buyers who have their finances in place, ready for exchange when the hammer comes down on a deal. Buyers then have 28 days to complete, meaning the selling house process is much speedier than on the open market.
However, there’s no guarantee your house will sell at auction and the price it does sell at is likely to be significantly below ‘market value’, as buyers at auction go with the idea of getting a ‘bargain’.
Also, although contracts are exchanged, there’s no guarantee the buyer won’t pull out. You, as the seller, also have to pay the auctioneer’s costs, room hire, marketing costs and more, making it quite a costly option.
Through a 'sell house fast' company you will get a cash offer for your property which, although may be a little below market value, is a guaranteed sale of your property and, depending on which company you go with, can be completed in as little as 7 days!
You also don’t have the hassle of going through the open market and having multiple house viewings from various potential buyers, which eventually come to nothing. There’s also no need for you to waste time on a comparative market analysis, as the quick house sale company will do all the valuation calculations for you.
Now we’ve got you wondering where you need to go to find one of these companies and the good news is…
We’re right here!
Here at The Property Buying Company we’re a cash buyer of houses made up of a team with over 50 years combined experience. We’ve got multiple good reviews on Trustpilot, to further back up our expertise!
Our offer for your property may be a bit below market value, but we will cover all your fees and have the CASH in your bank in a timescale to suit you. We also only require one quick viewing to make sure our valuation is accurate, meaning you won’t have to put up with any time wasters here!
Let us be your secret to a fast house sale by giving us a call or filling in our online form today to receive a no-obligation CASH offer, which we could have in your bank in as little as 7 days!