What is a Comparative Market Analysis (CMA)?
Property selling in Edmonton may involve many decisions, but perhaps the most important is deciding which valuation to place on the house. Pitch it too low, and while you may achieve a fast sale, you're probably also missing out on thousands of dollars - quite possibly a five-figure sum. Overestimating the selling price, though, is an even worse sin.
Those first few days and weeks are often crucial to a house sale. If your property is left to languish on the market for several months, viewers may dry up as they start to suspect there's a problem with your house in Edmonton. Subsequent price drops may serve only to confirm their fears. Where buyers are interested, they may point to its long time on the market as a reason for demanding a large deduction on the house's price, often reducing it to far below its true value. Start high, and you'll probably end by selling low - assuming you get to sell at all.
But how are you supposed to work out the correct price? It'll help if you've been keeping an eye on nearby properties, and have noted their price tags, and how easy or difficult they are to sell. Many of us don't do this, though, so what's the alternative? Well, the guidance of a knowledgable local Realtor is important. But combine their mine of information with a Comparative Market Analysis (CMA), and you're likely to land in the right price range.
So what is a CMA?
It's essentially a report that summarizes the prices of other 'similar' properties that are either on the market, or that have been up for sale recently. The information will be drawn from the Multiple Listing Service (MLS), a membership-only database that includes all sales and listings offered by estate agents across Canada. The general public can't get access to it, but most Realtors will be paying MLS members, and so will be able to access the data and construct a free CMA for you.
The MLS database covers four different sets of prices:
- Active Listings - These reflect the current asking price of similar properties across the area. Since current valuations are likely to reflect the present mood of the market, these can be the most accurate reflection of value. However, you will some times see multiple vendors trying to outdo one another with higher and higher prices. In some cases, they'll get buyers regardless, but this over-exuberance can lead new sellers astray.
- Properties Sold and Closed - It makes sense to temper current prices with those of properties that have actually been sold in recent months. The Realtor should have around six months of sales to choose from. It takes time to put together a CMA, so agents may try to reduce their workload by covering just two or three months of data. However, this period of time is often insufficient to give you a proper overview, so insist that six months of prices are used. You'll likely be relying on the CMA to a greater extent, so make sure that the contents are sufficiently comprehensive.
- Pending Sales - These are the sales that have been agreed, but not yet finalized. It's perhaps best to treat these with caution. There are many reasons why a sale can fall through, particularly if the market is extremely busy or rather quiet. However, if there aren't many comparable property sales to work with, you may have to rely on Pending Sales data to add extra texture.
- Expired Edmonton Sales - These cover the properties that were taken off the market before being sold. If you've got time to do some extra research, these can give you interesting information about the market. Maybe the condition put off buyers, or perhaps there was a local development that caused concern? The majority of unsold properties, though, fail simply because they were pitched at too high a price. This information gives you some hints as to what you shouldn't do, so use it wisely if you don't want your house to join the flotsam and jetsam of the unsold market.
Do CMAs have any limitations?
Well, yes. While one plot of land is roughly comparable to another, the waters start getting murkier once you begin adding actual structures. Your property will be compared to others that are roughly similar in terms of size, the number of baths and bedrooms, and other factors. However, while two four-bedroom houses of similar size may look identical on paper, in reality there could be a wealth of difference between them. Perhaps one is pristine, while the other hasn't seen a coat of paint in decades? Maybe one has a particularly ugly frontage that repels potential buyers before they've even made it up the path? It could be that one owner needed to secure a sale within weeks, whereas another was finnicky and averse to selling unless exactly the right buyer came along.
That's where a skilled Realtor in Edmonton can come in. They can take the raw data and build it up with intimate knowledge of the area. They may know why properties in one road are selling like hotcakes, while residents in another road simply can't shift their properties. Crucially, they'll have been inside your home, and will know exactly how saleable your property will be compared to others of a similar type. Where you can improve your property's appeal by tidying the front yard, or giving a room a lick of paint, the Realtor can give you some hints. They'll also take into account the proximity of local amenities. Is the property close to desirable schools, for instance, or strong transport links?
CMAs are an invaluable tool in estimating price. Combine them with good local Realtor in Edmonton knowledge, and you have a firm foundation for accurate property valuations.