john hurlbut
Fairly evaluating the price of a client's home is one of the most important things you can do...
By now, you probably know that online home valuations are not always accurate. That’s why most real estate experts do a comparative market analysis (or CMA) to find what a home will ACTUALLY sell for. If you’re new to the business or need a refresher on how to do these the right way, don’t worry. Here are a few steps you can take to calculate an accurate CMA like a pro:
First, Get the facts.
One of the advantages CMAs have over online valuations is that you can factor in the unique features of a property. Get to know everything about the home that might affect its value. You might even suggest to your client to do a pre-home inspection so that you can get as much information as possible. This is something an online portal can’t do, only by having boots on the ground are you able to find the nuance around what makes one home better, or worse, than another.
Next, Find good comparables. Once you understand a property inside and out, it’s time to find similar properties and see what they sold for. Location is key; the closer a comparable is to your client’s property, the better. Also, don’t forget that a comparable becomes less valuable the older it is. As a general rule of thumb, try to stay within 1 mile of the subject property and don’t use comparables older than 90 days. Of course, every property is different and this may not be possible with really unique or rural properties.
Finally, Make adjustments. No matter how many comparables you find, there won’t be one that’s a 100% replica of your client’s home. Adjust your comparables prices based on the unique facts you found in step one. Don’t forget to consider how market factors have changed since the sale of the comparable home. Also, don’t overwhelm your client with an inordinate amount of comparables. If you’re in a low inventory environment, you may not get enough comparable homes, however if you have more than 5 active, 5 pending and 5 sold comparable homes, you should probably try to narrow them down a bit.