What Is a Comparative Market Analysis (CMA)?
When a homeowner decides to sell their property, their first question is always, "How much is it worth?" To answer this, a real estate broker will generate a Comparative Market Analysis (CMA).
A CMA relies entirely on the principle of substitution: a buyer will not pay more for your house than it would cost them to buy an identical house down the street. The agent searches the Multiple Listing Service (MLS) for "comps"—recently sold homes in the exact same neighborhood that have similar square footage, bedroom counts, and lot sizes. By analyzing what buyers actually paid for those comparable homes over the last 90 days, the agent can recommend an accurate, data-driven asking price for the seller's home.
CMA vs. Formal Appraisal
It is vital to understand that a CMA is not a legally binding document.
- The CMA is prepared by a real estate agent for free as a marketing tool to win the seller's business. It is a highly educated guess. A bank will never loan money based on a CMA.
- An Appraisal is a massive, strictly regulated legal document prepared by a licensed, independent Appraiser. An appraiser uses complex mathematical adjustments to calculate the Fair Market Value. If a buyer is using a mortgage, the bank will exclusively rely on the formal appraisal to approve the loan.
The Danger of Overpricing
Sellers often ignore the CMA and demand a higher asking price based on emotion. This is incredibly dangerous. If a seller lists a house for $600,000, but the CMA shows all the comps sold for $500,000, the house will sit on the market for months. Worse, even if a buyer agrees to pay $600,000, the bank's formal appraisal will likely come in at $500,000. When that happens, the bank will refuse to fund the massive mortgage, and the entire real estate transaction will collapse.
Related Terms
- Appraisal — The formal, bank-required valuation that supersedes the CMA
- Fair Market Value — The actual market price the CMA is attempting to guess
- Listing Agreement — The contract signed after the seller agrees with the CMA pricing strategy
Barnes Walker Real Estate Transactions
Barnes Walker's attorneys assist Florida sellers in navigating the fallout when aggressive CMA pricing leads to low bank appraisals, utilizing contract addendums and aggressive negotiation to save stalled transactions and keep multi-million-dollar real estate deals from collapsing. Request a legal inquiry for assistance.
Reviewed by the attorneys at Barnes Walker, Goethe, Shea & Robinson, PLLC