when preparing a CMA how do you adjust for the difference in each home?

Asked by Sunny, Wilmington, NC Thu Sep 22, 2011

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Matt Ciganek, Agent, San Francisco, CA
Thu Sep 22, 2011
Hi Sunny-As a former certified appraiser, I can tell you that a good agent who knows a neighborhood will often give you a better price analysis than an appraiser who is forced to cover a larger area for economic reasons. Many of the responses to your question by the other agents have excellent recommendations as far as adjusting for differences. I would add that it's not cut and dry. Local knowledge and a good understanding of what's going on in the active market, supported by comparable sales makes the science of determining a price into an "art". What I'm saying is that I don't think there's an easy way to quantify local knowledge and experience. Hope that helps!
Matt Ciganek
Barbagelata Real Estate
4 votes
Alan May, Agent, Evanston, IL
Fri Sep 30, 2011
In my area, as in others, the houses vary dramatically one to the next. So it's far more art, and far less science.

It's necessary to really "think" like a buyer... would I like this floorplan, over than one? Would I prefer this location, or this school district? Is the curb appeal as cute and charming as the other, and if not, how much would/should I adjust?

Does the lack of a basement in this property really hurt the appeal of an otherwise terrific home, vs. the house with a great basement, but so-so 1st and 2nd floor?

That when experience, and familiarity with the market (both actives and solds) comes heavily into play. There's a lot of "gut instinct" at play, and fortunately, I've got enough "gut" for several agents. ;-)
2 votes
Astrid Lacit…, Agent, San Francisco, CA
Thu Sep 22, 2011
Experience. In my practice I do not deal with tract homes, so each home has unique characteristics. Furthermore, I look at not only the immediate area, but also analyze who the potential buyer is for each property, evaluate what other choices that potential buyer may have . For example, a Noe Valley buyer may well consider Glen Park, Bernal. Therefore, being familiar with various neighborhoods, price points makes a huge difference in successful marketing, of which a CMA is only one aspect.

Astrid Lacitis
Keynote Properties
415 860 0765
2 votes
J Mario Preza, Agent, Daly City, CA
Thu Jan 9, 2014
A good question! It isn't a science but more of an art. And art, in order to do it right, requires practice! Someone that hasn't done too many evaluations and attempts to arrive at a fair price purely from "analytics" may miss some of the nuances of the situation. However, a good evaluation filters plenty of variables, but in the end, concludes with the thought, that the best "appraisal for any house" is the one that is being done by a willing and able buyer when you receive the bet offer you have on the table.
1 vote
Shawn Ryan R…, Agent, Belleville, NJ
Sat Dec 10, 2011
first, you try to use homes that are highly similar, making adjustments less necessary. to answer your question, though, there is no official scale for adjusting (i.e. an extra bath is worth $10,000 and a bedroom $20,000). the realtor must use their own discretion
1 vote
Erika Burke, Agent, San Francisco, CA
Fri Sep 30, 2011
Hi Sunny,
This is an easy answer. You pull comparables based on square foot, number of bedrooms, geographic areas and a few other perameters. As with any mathematical equation, you throw out the top and bottom price and take an average. The tricky part - that requires an experienced agent, is knowledge of the neighborhoods and their amenities, condition of the home as compared to others, recent upgrades, any liens or litigation issues that may be on title. I've even been known to ring agents that have sold homes I am using as comparables and ask them direct questions on the odd chance I have not seen the home during frequent home tours. One also looks at current inventory for sale and takes into consideration if it is a buyers or sellers market. Finally there is an opinion of value....which even the banks call agents for (A BPO-Broker Price Opinion). When the home goes to market, the market will answer by coming forward if the pricing seems appropriate and/or agents and prospects providing feedback as to the pricing. If your home recieves no offers and activity it is a sign that it has been priced incorrectly - even if it seems right according to comparables. Your agent and the home seller must both be willing to flex to make the home move at correct pricing and/or sometimes determine, that this may not be the right time to sell if the pricing is not agreeable.
1 vote
Don Tepper, Agent, Burke, VA
Thu Sep 22, 2011
Good answers below. As Rob notes, it's both an art and a science. Though it sounds like many of the answers below have described more of the art than the science.

From the "science" part, it still requires knowledge of local market conditions. Example: Does it make much of a difference if a house is on a 1/3 acre lot versus a 1/4 acre lot? Not much in Springfield, Virginia. A lot more in San Diego. Does it make much of a difference if a house has a swimming pool? Absolutely in some areas; not really in others. So your agent really has to know what's valued by buyers in your specific area.

Major factors tend to be number of bathrooms, number of bedrooms, square footage of property, lot size, age of property (if there's a significant difference), and some other items. Moderate factors (in some areas) deal with whether the property has a garage, carport, driveway, or just on-street parking; swimming pool; finished basement; home style; and more. (Some of those "moderate" factors may be "major" in some areas. That's where the value of a Realtor who knows the community comes into play.)

To do a CMA, a Realtor will select similar properties, then adjust them to conform to the subject house. (You want to know the value of a 3 bedroom home. One of the comps has 4 bedrooms. You'd subtract an amount from the 4-bedroom comp to bring it in line with the 3-bedroom.) So, for instance, you might end up with adjusted comps of $150,000, $155,000, and $160,000. That's a pretty good indication that the subject house probably is within that range. Then, again, the "art" comes into play to determine where along that continuum the specific house most likely falls.

Even that's not the end. As a home seller, you may want to get the highest price for your home. Or you may want to sell quickly. In the example above, your Realtor might say: "If you want a quick offer, consider pricing it at $149,900. If you're willing to wait a bit longer but maybe get more for the house, consider a price of $154,900." So the CMA--while very useful in determining value--isn't the absolute final word in pricing your home.

Hope that helps.
1 vote
Rob Regan, Agent, San Francisco, CA
Thu Sep 22, 2011
It is both an art and a science. And every property type, home amenity, and neighborhood comes with a myriad of factors. In other words, there is no simple way of explaining how to do it. Like asking Van Gogh how to paint (ok, that's stretching the art and the skill part :)

Some you may simply look at the cost - say a remodeled kitchen vs. and unremodeled one. Some you need to know the value in the neighborhood - like a condo with parking and one without. But there are so many intagibles that create a "feel" that only agents and buyers can see - sellers are usually too biased to believe that their home doesn't have the same "feel" as another seemingly similar home but with a better layout, or closets, or light or.... staging, etc, etc. And appraisers - unless they look at homes with buyers - they won't catch these things either.

Not easy to do a CMA, some of mine take many hours
Web Reference:  http://www.SF-MLS-Search.com
1 vote
Eric J Soder…, , Pleasanton, CA
Thu Sep 22, 2011
Hi Sunny,

Go to the llink in the web reference below. It will help you understand the CMA.

Best Regards,

Eric Soderlund
1 vote
Eric Castong…, Agent, San Francisco, CA
Thu Sep 22, 2011
Hi Sunny

in San Francisco where I am, the homes vary widely, so interpolating is a part of our process. Now with inventory low, it makes the CMA process even harder. I have been going outside the neighborhoods where the property is to see what similar homes in other areas are listing and selling for too, since buyers are looking in multiple neighborhoods. I also look at the competition (active listings) for their interest level and how long they are on the market and if necessary, I may have to pull comps from outside areas to get an idea of value and then adjust based on a percentage basis.

I'm finding that often it's also a 'feels like' answer and give a range. Many prices now are generated very psychologically, taking into account the price ranges that buyers are looking in; i.e. up to $589,000 (rather than $629,000), $799,000 (rather than $819,000), etc...

Hope that helps.

Eric Castongia
Zephyr Real Estate
San Francisco, CA
DRE NO. 01188380
Web Reference:  http://www.SFHotBuy.com
1 vote
Phil Rotondo, Agent, Melbourne, FL
Thu Sep 22, 2011
In short, yes...... as long as the criteria for the comparables are in close proximity to the subject property.
Web Reference:  http://www.321property.com
1 vote
Genni Jett, Agent, Jacksonville, FL
Fri Jul 28, 2017
A useful CMA requires that you select comparable properties carefully. They should be as close-by as possible, ideally in the same neighborhood. They should be current sales, best within the previous few weeks. They need to exhibit features and characteristics as close to those of your subject property as possible. Doing all of this well will normally result in a CMA you can rely on.
0 votes
Genni Jett, Agent, Jacksonville, FL
Fri Jul 28, 2017
A solid CMA requires that you select comparable properties carefully. They should be as close-by as possible, ideally in the same neighborhood. They should be current sales, best within the previous few months. They need to exhibit features and characteristics as close to those of your subject property as possible. Doing all of this well will normally result in a CMA you can rely on.
0 votes
Lbrun10110, Home Buyer, San Francisco, CA
Fri Feb 17, 2017
Doing comps for a CMA. 1) How much value does a 4th bedroom have?
2) How musch added value for sewer VS Septic?
0 votes
Christy Quave, Agent, Slidell, LA
Thu Sep 8, 2016
0 votes
Frank Dolski, Agent, Lahaska, PA
Mon Dec 23, 2013

If the home is in a subdivision, it is much easier but can vary. Location, schools, square footage, amenities, landscaping, patio/deck, finished basement, and other upgrades are included when I do a CMA. I try to find a "like home/homes" in the same subdivision and if not, like properties in the same area. I have seen the same model vary as much as $50,000 as an example in the same community. A home on a busy road is less desirable then one backing up to privacy.
The discount ratio also varies in each area as well so the spread on your CMA may be wider. In any event, it must appraise if that contingency is selected. I have done Broker market analysis's as well as CMA's on many properties. The more you do, the better you are at doing them. A good acid test is your variance on the list to price ratio on the homes that you list and sell.

Frank Dolski MBA, ABR, e-PRO
Associate Broker
Certified Relocation Specialist
Previews Luxury Home Specialist
Coldwell Banker Hearthside Realtors
Ranked #1 In The State of PA in 2012 For Affiliated Coldwell Banker International Realtors
2012 Coldwell Banker International President’s Elite Award
2010-2011 Coldwell Banker International President’s Circle Award
215-803-3237 (mobile)
215-794-1070 x-103
0 votes
Oggi Kashi, Agent, San Francisco, CA
Thu Sep 22, 2011

I'm just wondering, your profile says you are a "Home Seller" in Wilmington, NC" but you are asking this question in the San Francisco home selling forum. Was that your intention?

Oggi Kashi 415-690-3792
Paragon Real Estate Group
All data from sources deemed reliable but subject to error and omission, and not warranted. CA DRE 01844627
Web Reference:  http://www.oggikashi.com/
0 votes
Ron Thomas, Agent, Fresno, CA
Thu Sep 22, 2011
Although a CMA is not as detailed as an Appraisal, we use similar methods to determine the worth:
The biggest difference is that with an Appraisal, they use 3-4 Comp's and detail the differences,
and with a CMA we try to match the differences, (3 bedroom, 2 bath, 1450-1650 sqft, single story, pool, within 1 mile...) and we will use as many as 40-50 SOLD houses to show the Median, the Average and the $$/sqft.

If you haven't seen an Appraisal, this is how that works:
Visualize a series of COLUMNS, probably 4 or 5;
The First Column is the SUBJECT HOUSE and the others are COMP's.
Down the page we list FEATURES or FACTORS; such as # Bedrooms, # Baths, House Sqft, Lot Sqft, Fireplace, Pool, Roof, Garage, Fencing. Got it?
Now, in each box created, there will be a VALUE: Lets say the subject house is 915 sqft it would get --- or 0. And the first Comp house has 2500 sqft, it might get -100,000; which means that the house is WORTH $100,000 more because of the square-footage. (It is a negative number because the Selling price of that Comp house was approximately $100,000 more BECAUSE of the square footage and we have to deduct that $100,000 to bring them to equity.) Got it?

Now, lets say that the Subject house has $5,000 worth of new fencing and the Comp house has 25 year old OK fencing.: Then the SUBJECT house would get +5,000 and the Comp. house would get --- or 0.

When you go down the page, and enter everything, you get total Comparative Values on the two houses, which allows for the DIFFERENCES.

The two houses DO NOT have to be literally COMPARABLE, they MAKE then comparable with the VALUES.

So the house next door is larger, so what? They made up for that with the values.

Now, if you understand what I just did, then you will understand why;
1.) Two Appraisals can come so close together, and,
2.) Why the Bank will not listen to you about the results.

and in fact I will give you a third;

3.) If you hire your own Appraiser, he will end up with about the same numbers!

Also, please do not compare/equate the ASSESSMENT with the APPRAISAL: The ASSESSMENT is based on the LAST SELLING PRICE OF THE PROPERTY which might be last year. five years ago, or thirty years ago.

I hope I've helped.

Good luck and may God bless
0 votes
Frank Dolski, Agent, Lahaska, PA
Thu Sep 22, 2011
Good question. What I do is look at location, "like properties" and use my professional opinion with comps to support the data. Location as always, outranks everything!
Web Reference:  http://www.FrankDolski.com
0 votes
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