No two homes are alike, which is why pricing a home for sale can be so challenging.
You may have an idea of what your home is worth on the open market, but in order to sell it, you’ll have to support your price to buyers with comparables – other similar nearby homes that have sold recently or are currently for sale.
To help determine the right asking price for your home, your real estate professional will prepare a comparative or comparable market analysis, or CMA.
The CMA is a professional report that real estate agents give to their clients. CMAs are generated by a computer program from your agent’s multiple listing service, (MLS). The MLS is available to members only, and they pay a fee to get access to the service’s public and proprietary data, including tax information, sold transactions, and listings input by all cooperating MLS members.
Your agent puts search perimeters into the CMA program for homes for sale or those that have recently sold that are most similar to your home. This information is sorted according to fields of information such as neighborhood or zip code, number of bedrooms, number of baths, age of the home, square footage, price range, sold dates within 3-6 months, and other data.
The program then creates a report that tells the agent which homes most similar to yours have sold recently and which homes are for sale.
The CMA is an analysis based on the most current information. It provides unbiased empirical evidence of the latest market conditions as they relate to your home. You can clearly see a snapshot of the market in the CMA – that prices are going up or down, and what buyers are willing to pay right now.
As a pricing tool, the CMA has some limitations. For example, it can’t tell you why some homes sell above or below the market average. While one home sold for $130 per square foot, another home on the same block sold for $120 per square foot - the same week!
What made the difference?
There are features about any home that can’t be quantified by a CMA, but you can read through each listing in the report for clues for why a home sold for more or less than the market average.
Between identical homes, one property may simply offer better drive-up appeal or is in better condition. Clutter, dirt, overcrowded closets, pet odors or too much furniture can overwhelm buyers and cause them to view a property negatively, which will influence the price they’re willing to pay. To avoid this, be sure you are staging your home to sell by simplifying your space. You can sometimes tell from pictures on the CMA if conditions made a difference in a home’s selling price.
Also, buyer and seller motivation can’t be quantified. You don’t know why a seller agreed to take less for their home or why a buyer paid more for another home. Family problems, corporate relocations and other reasons all play a role. What you can learn from the CMA is how long the home took to sell. If it was quick, the seller was highly motivated.
For these reasons, your real estate professional may suggest that you disregard the highest and lowest sales price in a CMA before choosing your listing price.
As you’ve lived in your home, you’ve made repairs and improvements that only you know about. Your real estate professional can help you look at these costs realistically.
While a home with a new roof is certainly worth more than a home that needs a new roof, you may not get 100% of your investment back in your sales price. What a new roof can do, however, is make your home more attractive to buyers, and more likely to attract offers.
Your real estate professional will suggest a pricing strategy for you based on the CMA, but the asking price will be up to you. You have to consider your home’s condition and your motivation as well as local market trends.
Remember, comparables are your home’s competition – the homes you use to compare to yours are the same homes buyers will use for comparison as they shop for a home.
They’ll choose the home that best suits their needs and what they perceive to be the best value in price, location, and condition.