Comparable Market Analysis? And how to price your home.

By: Axel Ziba

Comparable Market Analysis? And how to price your home.

Tags: Homesellers, how to sell my home, My home valuation, sell my home tips, cma, comparable market analysis, how to price

REALTORS® and appraisers, use Comparable Market Analysis as one of the methods To evaluate a property and find out how much a home worth in particular timing.
 
In order to use this method, they need to collect similar properties that are active and sold within the same market.
The keyword here is “the same market”
To determine the market, they need to analyze sales ratio (number of sold compared to active percentages to understand whether these activities and percentages are steadily similar for a sustained period of time.
We have another keyword: Sustained period. Some people see it as a period of time like 90 days or so, but more precise way of analyzing is to understand this sustained period of time as a time that the market activities were similar.
To be more precise, lets explain this:
Real estate activities can directly impacted by third party affect. These factors can direct affects consumers’ confidence and affordability level.
-Interest rate changes
-Local and national governmental political influence and implementation of new regulations
-Local and national economy
-Global economy
-Local municipal zoning change and neighborhoods improvement
-War
 
To start the comparable market analysis and home valuation, we need to look at our subject property first.
-Type of the home (whether it is detached, attached, lot so on)
-Style of home: if it is single family, duplex, condo, townhouse and so on
-Location: What city, What map area and then what sub-area and community is it located. For instance. City is Vancouver, sub-area is Vancouver West and sub-area is Kitsilano
-Then within that sub-area and community we also can narrow things down whether it is closer to ocean or not. For instance, Kitsilano is a great example. Homes north of 4th ave have higher valuation as they are closer to the water.
-Title of the property: Is it
-freehold Non-Strata,
-is it Freehold Strata ( detached homes that are the land is owned by you)
-Is it Freehold-strata (attached and or detached properties that are freehold but part of strata(share of the land is owned)
-Is it lease hold and so on
 
Now let’s gather similar properties in that particular radius selection:
 
Some of the factors to review similarities are:
-sq ft,
-lot sizes,
-year of built,
And many other important factor that can impact the price and valuation.
 
 
It is good to analyze both active and sold homes. but a listed homes prices are not the exact pricing we are looking for since we are not sure how much they can be sold depending on that particular market. If we are in a buyer’s market, they may sell for listed or below the listed price and if in Seller’s market, they could sell for listed or above listed price. Hence, it is best to analyze sold homes for the past few month.
These similar homes and the average and median pricing that they have sold, would provide us with Comparable Market Analysis.
 
How to price your property more accurately?
The most important factor and first step to overcome when listing your home for sale is to price it and price it accurately.
In addition to Comparable Market analysis which is the ground level for give us the tool to start pricing a home, we have to dig further into more details for an accurate pricing.
 
If selecting sold and active homes in the past few month, we have to filter out or do further $ analyzation if the past few month of selection were not the same in regards to activities.
To find out how far to go back in time to select sold homes, we have to look for a period within similar market. So if the interest rates were same for the past year and market activities remained the same in that particular sub-area, then go as far as this similarity even for 12 or 18 month if it is so.
But if the third party factor impacted the market, for instance if the interest rates are predicted to rise every months and every months activities are getting less, select from the period were the market was impacted, then using home price indexing to analyze the $ amount change since the market change and add or deduct that from the similar home that was sold 3 months ago were the current $ as per home price indexing is lowered.
 
When collecting the similar properties, we have to do an additional calculation based on
-number of bed and bath,
-quality of material designed
-the direction its facing. And in regards to condominium floor level it is located.
-Amenities nearby
-Being on quiet or busy road
-Municipal connection like, water, electricity and sewage
-Renovation and upgrades
-Floor layout
And add or deduct for the factors above to come up with the precise pricing.
Other than above CMA and added calculation, it is important to keep an eye on $ per sq ft sold as it is a winning tool specifically for condos and attached market that are sold in the same building.