| Researching The Comp’s – Comparative Market Analysis (For Buyers)
One of the most important research tasks when purchasing a home is researching what is a fair price for the home. You need to research what is called comparables (comp’s).
Your buyers agent will normally use sophisticated software along with detailed local knowledge to provide you what is called a “Comparative Market Analysis” (CMA).
What is a CMA?
CMA is short for “Comparative Market Analysis” – It is a detailed report comparing a home to other similar homes in the same area that assists in ascertaining a fair market value for a home.
Producing an effective CMA is far more than simply running the numbers on an automated program. By far the most important ingredient is “local knowledge”. Your buyers agent must be familiar with your neighbourhood and knowledgeable about both the historical and current sale values of real estate there.
Research Properties in your neighbourhood that are comparable to the property you are looking at buying, & have recently sold. It is important to compare with actual sold properties. Not with list prices. Properties are only worth what people will pay for them.
Comps must also be comparable in:
- Position (as close as possible)
- Internal size
- Rooms, bathrooms etc
- Land size
- Date of sale (the more recent the better)
Obviously no two properties are identical, your buyers agent will make adjustments for the differences between the sold properties and the property you are looking at.
The CMA you receive from your agent should (at a minimum) include
- The addresses of the comparable properties
- Sold prices of each comparable property
- Sold date of each comparable property
- Land size
- A photo and style of each property
- The total square meterage of each home
- The dollar amount per square metre
- Number of bedrooms, baths, and garages
The final price calculated as fair value also needs to take into account its unique features, local inventory, interest rates and how competitive the market is at the time.
Much more weighting needs to be given to “Sold” properties over “Listed” properties. Listing prices only an indication of what the seller would like the property to sell for. This is not always reflective of the true value.
If the home you are considering is unique and very different, so much so that there are no real comparable properties, you may be best to have an independent professional valuer provide you a valuation.