Understanding how to do a comparative market analysis (CMA) on the Multiple Listing Service (MLS) is crucial for real estate professionals. A well-executed CMA helps determine a property’s fair market value, enabling sellers to set competitive listing prices and buyers to make informed offers. This guide provides a comprehensive walkthrough on leveraging the MLS for accurate and effective CMAs.
Utilizing the MLS for Comprehensive Data
The MLS is the primary resource for real estate agents, offering real-time data on sold properties, active listings, and pending sales. This wealth of information allows for precise comparisons, ensuring the CMA reflects current market conditions. Here’s how to utilize the MLS effectively:
Defining Search Parameters within the MLS
Begin by setting specific search criteria within the MLS to identify comparable properties (comps). Key parameters include:
- Location: Prioritize properties within the same subdivision or a half-mile radius. Expand the search area gradually if needed, considering zip code and school district.
- Property Type: Match the subject property’s style (e.g., townhouse, single-family, ranch). Note the number of stories and any unique architectural features.
- Square Footage: Aim for comps within 10% of the subject property’s size.
- Bedrooms and Bathrooms: Start with an identical count and adjust the search if necessary.
- Sold Date: Focus on recent sales within the past three to six months for the most relevant data.
- Lot Size: Consider comparable lot sizes, especially for properties with larger lots.
- Garage Type: Note whether the garage is attached or detached and its capacity.
- Construction Type: Identify the exterior materials (brick, stucco) and interior finishes (wood, tile).
- Special Features: Include amenities like pools, decks, fireplaces, or finished basements.
Selecting Comparable Properties from MLS Data
Ideally, a CMA should include three to ten comparable properties. When reviewing potential comps from the MLS, prioritize those with the fewest adjustments required and the most recent sales dates.
Analyzing and Adjusting Comps from the MLS
After selecting comps from the MLS, analyze and adjust their values to account for differences from the subject property.
Making Adjustments Based on MLS Data
Variations in features between the comps and the subject property necessitate adjustments. For instance:
- Extra Bedroom: Add the market value of an extra bedroom to the comp’s sold price.
- Smaller Lot: Subtract the value difference for a smaller lot from the comp’s sold price.
Consult your brokerage, appraisers, or reliable software tools to determine accurate adjustment values for your market.
Calculating Adjusted Sales Price
Calculate the adjusted sales price per square foot for each comp by dividing its adjusted price by its total square footage. This standardized value facilitates direct comparisons.
Determining the Listing Price
After analyzing and adjusting comps from the MLS, use the data to determine a recommended listing price.
Weighing the Most Relevant Comps
Give greater weight to comps requiring minimal adjustments and with the most recent sales dates. These provide the most accurate reflection of the current market value.
Calculating the Average Price Per Square Foot
Calculate the average adjusted price per square foot of the weighted comps. Multiply this average by the subject property’s square footage to arrive at a preliminary listing price.
Factoring in Market Conditions
Consider current market conditions, such as inventory levels and buyer demand, to make final adjustments to the listing price. A low inventory market might justify a slightly higher price, while a high inventory market might necessitate a more competitive price.
Conclusion
Mastering how to do a comparative market analysis on the MLS empowers real estate professionals to provide accurate valuations and guide clients effectively. By leveraging the MLS’s comprehensive data, agents can confidently determine a property’s fair market value, leading to successful transactions for both buyers and sellers. Remember that continuous practice and staying updated on market trends are essential for refining your CMA skills.
