Finding the value, or fair price, of a property

Don't want to pay too much for a home? Don't want to sell your existing home too cheap? Wondering "What is my home worth?" A CMA -- Comparative Market Analysis -- is the strongest tool in your home buying arsenal to ensure you are not overpaying for the property you intend to buy or to sell.

A CMA is a research report on housing sales activity in the area you are either looking to sell in or to buy in, focusing on 3-10 properties that are similar to the property in question and located in the same neighborhood or nearby. (We have posted general real estate sales information for Rhode Island on this site.) The CMA will list specific details of example properties including the number of bedrooms, number of baths, total room count, square footage, age, etc. for similar properties that are currently on the market, those that are under contract but not yet closed (called pending listings), have closed and transferred ownership (called sold listings) as well as those listings that have either expired without selling or have been withdrawn from the market by the seller. Because a CMA compares similar properties it can give a buyer a clear idea of current housing values in that specific housing market. The CMA is very important but it should not be used as an absolute determination of the value of the specific property because it generally does not account for the condition for the property.

Photo Copyright © 2005 Paul Silver Photography

View Our Featured Real Estate Listings!

Search the Multiple Listing Service For RI Homes For Sale

While the CMA may list homes that are currently on the market, pending sale, or have had the listing expire before a sale was completed, the properties that have sold and closed are actually the most useful. Sold and closed data is important because these detail specifically what buyers are willing to pay (and lenders are willing to lend) for specific properties. Don't put too much weight on the prices of properties currently on the market. These homes could be radically overpriced compared to the price they eventually sell for.Also one of the biggest reasons that a property listing will expire without selling is because it is overpriced, so the prices of expired listings should be given far less weight in your considerations.

What does a CMA include?

The following information on the subject property should be included in the CMA as well as the same information on between 3 to 10 additional similar properties:

• Street address
• Square footage
• Number of bedrooms, number of baths, number of total rooms
• Age of structure
• Asking price and sold price if closed

Where do you get a CMA? If you are represented by a Buyer's Agent, they should develop a CMA for you. Because nearly all Multiple Listing Service organizations are computerized, the Buyer's Agent can create a CMA easily. If you are dealing with a real estate Agent who is representing the seller of the property they likely will not develop a CMA for you, because they represent and must be loyalty to the seller. This often prevents them giving you any information that could compromise the seller's position. This is another reason that all home buyers should consider using a Buyer's Agent. See the discussion on Buyer's Agency.

So what is your home worth? How much should you pay or what should the asking price be?

A CMA can be one of your most important tools in negotiating the sale price of the house, because the CMA details where the price the house you are interested in falls in that specific real estate market. Is it an under priced bargain home, priced at a fair price for both buyer and seller, or is it overpriced? If the seller is unwilling to budge on the price in this instance, it might be wise to pass on the deal or negotiate for reductions and concessions. If you overpay for a home in a strongly appreciating market, the market may eventually cover the premium you pay for the house. But if you overpay in a flat or declining market, you can end up losing money.