ABOUT THE MARKET ANALYSIS
The most widely used method of establishing the price of properties is the Comparative Market Analysis or, CMA as it is called. There are other ways to determine a property’s value, such a replacement cost or the income approach, but the CMA is the most viable and the most realistic.
Market Value is obtained by comparing the subject property with recently sold comparable properties and other pertinent market data. Since no two parcels of real estate are exactly alike, each comparable process must be adjusted for any similar features. The principal factors for which adjustments must be made fall into four basic categories:
1. Date of sale: An adjustment must be made if economic changes occur between the date of sale of the comparable property and the date of the Comparative Market Analysis.
2. Location: An adjustment may be necessary to compensate for location differences. For example, similar properties might differ in price from lake to lake or even in more desirable locations with the same neighborhood.
3. Physical features: Physical features that may cause adjustments include age of building(s), size of lot, landscaping, construction, number of rooms, square feet of living space, interior and exterior condition, presence or absence of garage, fireplace, and so forth.
4. Terms and conditions of sale: This consideration becomes important if a sale is not financed by a standard mortgage procedure.
5. Change of use or occupancy.
Market Price, on the other hand, is what a property actually sells for - it’s Selling Price.
It is important to distinguish between market value and cost. One of the most common errors made in valuing property is the assumption that cost represents market value. Cost and market values may be equal, and often are when the improvements on a property are new and represent the highest and best use, but more often, cost does not equal market value. For example, two homes are identical in every respect except that one is located on a street with heavy traffic and the other is on a quiet residential street. The value of the former may be less than that of the latter, although the cost of each may be exactly the same.
As much as we may not like the idea, buyers establish value. A property is only worth what they are willing to pay for it after it has been subjected to the market for a reasonable time. What buyers are willing to pay for a property is determined by the laws of supply and demand. Realtors, as well as property owners, do not make economic rules. . . Supply and Demand Does.
We as professionals try to obtain the best possible price for you as a seller in today’s market bearing in mind that your property is competing with all similar properties on the market.
Please keep in mind that this document is a Competitive Market Analysis and is not to be considered an Appraisal.