When determining a home’s value, real estate professionals often use a Comparative Market Analysis (CMA). A crucial question is: how many comparables should be used for an accurate CMA? While there’s no magic number, understanding the factors influencing this decision is key. This article explores the components of a CMA and the importance of selecting appropriate comparables.
A CMA analyzes recently sold properties (comparables or “comps”) similar to the subject property. Ideally, agents aim for at least three comparables within the past 3-6 months. However, market conditions and data availability can influence this number. In areas with limited recent sales, agents might include pending sales, active listings, or even expired listings to illustrate pricing trends. Let’s delve into the key factors considered when choosing comparables:
Key Components of a CMA and Comparable Selection
Several factors contribute to a comprehensive CMA, directly impacting the selection of comparables:
Location and Proximity
Ideally, comparables should be in the same neighborhood as the subject property. If insufficient local sales exist, agents expand the search to similar areas considering schools, crime rates, noise levels, and access to amenities. Proximity is crucial for accurate comparisons.
Lot Size Considerations
Lot size significantly affects property value. Even small differences can substantially impact price, making it essential to choose comparables with similar lot sizes.
Square Footage Analysis
A home’s livable square footage is a major determinant of value. Larger homes generally command higher prices. Comparables should ideally have similar square footage to the subject property.
Age and Condition of the Property
The year of construction and renovation status influence value. Newer homes or those with high-end renovations often fetch higher prices. While updated historic homes can also be valuable, comparing them requires careful consideration of their unique characteristics.
Bedroom and Bathroom Count
The number of bedrooms and bathrooms directly impacts value. More bedrooms and bathrooms typically translate to a higher price. Selecting comparables with similar bedroom and bathroom counts is crucial.
Impact of Special Features
Features like fireplaces, patios, pools, and finished basements can influence value. However, their impact varies by market. Agents must determine which features are valued in the local area and select comparables accordingly.
Date of Sale and Market Adjustments
Comparables should ideally have sold within the past 3-6 months. Older sales require price adjustments to reflect current market conditions, accounting for fluctuations in inventory and interest rates.
Financing and Sale Terms
Financing type and sale terms can impact the final sale price. Buyer contingencies or seller concessions (e.g., paying closing costs or making repairs) can affect the comparable’s actual value and must be considered.
Conclusion: Selecting the Right Number of Comparables
While aiming for at least three comparables is a good starting point, the ideal number depends on market conditions and the availability of similar properties. A thorough CMA considers various factors beyond just the number of comparables. Analyzing location, size, age, condition, features, and sale terms ensures a comprehensive and accurate valuation. Ultimately, the goal is to select comparables that provide the most accurate reflection of the subject property’s market value.
