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What is this “Comparative Market Analysis” thing?

Posted by Rona Fischman October 19, 2007 12:57 PM

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When I wrote on low-balling, I stressed that negotiating should be based on knowledge of true market value. This brought forth some questions and disparaging comments about the vagaries of getting good information.

A Comparative Market Analysis (CMA) is done by looking at the properties that are most like the one for sale, the “target.” The like-kind properties’ prices are then adjusted so I can compare apples with apples, by deducting value from the target for things that are worse and adding value to the target for things that are better. I get a lot of information about the like-kind properties from a combination of reading the MLS sheets, seeing the properties when they were on sale, and by asking the former listing agent.

There usually is a preponderance of evidence that will point to a price range for a property. When I do it, I keep going until I see a pattern. Sometimes it takes me two hours to do a complete report if there are not a lot of obvious like-kind properties.

Experienced agents know how to do this. I think you really need it.

Asking prices can be way out of whack. If you are negotiating from an asking price, my question would be: which asking price? Here are some examples of original asking prices (in thousands) with their final sale prices (all sold in past six months):

$419 to $364.5
$449 to $350
$539.9 to $395
$575 to $449
$599 to $430
$529 to $475
$499.9 to $450
$659.6 to $590
$640 to $568
$600 to $570
$789 to $625

Without knowing what the property is worth, how can you even think of negotiating?

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Scott Van Voorhis is a freelance writer who specializes in real estate and business issues.

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