What is a CMA and Why Do You Need One?
A Comparative Market Analysis or CMA is a report that agents use to help determine the proper value of your home. It helps them to price your home based on other similar properties in your area. It is not an appraisal.
It is important to know how much your home is really worth because homes that are overpriced tend to linger on the market for months and months. When a home is listed for more than 90 days, buyers start to get suspicious about the reason why, which often produces a domino effect. If interest is low it will deter other prospective buyers from considering your property.
How Does a CMA Help You?
Both buyers and sellers use CMAs to their benefit. Buyers often request one in order to determine whether or not your home is overpriced. Besides helping to ensure that your home is priced appropriately, the CMA can also help you avoid making unnecessary improvements before the sale. If you’ve been thinking about remodeling your kitchen or replacing the siding, the CMA will show you which improvement will net you a higher return on investment.
Who Produces the CMA?
Again, the CMA is not an appraisal. It is not done by an appraiser, but by the seller’s agent. Your agent will come to your house and do a general inspection of your home. It’s not as in-depth as a full inspection or appraisal. Your agent will just assess the overall condition of your home compared to others in your neighborhood.
Using market data specific to your location, your agent will analyze current market trends, assess how much similar homes in your neighborhood are selling for, and will use that information to recommend an asking price.
Therefore if you are planning to make any upgrades or improvements, you should let your agent know when they come to assess your home. They can use that information to make a much stronger assessment and will be able to make recommendations about which improvements are most beneficial to you.
The Importance of the Appraisal
One step that sellers often overlook in the home selling process is the appraisal. You can hypothetically list your home for any asking price you want (of course that’s not the best strategy), but mortgage lenders will only approve buyers for the amount of the appraisal – and if it falls short of the agreed upon sales price, this could result in the purchase contract getting cancelled. (this is most critical when dealing with loans with lower down payments)
Understanding this concept will help you to grasp the importance of the appraisal when selling a home. It will also help you to make the right choices when pricing your home, as you’ll want to use the same information the appraiser will – market data, recent sales, comparable homes on the market – to determine the market value of your home.
What Does an Appraisal Involve?
A home appraisal, at its essence, is the process of determining how much a home is worth. The appraisal in a home sale is required by the lender (the buyer pays for it) and it is an essential step in the financing approval process. It is used to determine the fair market value of your home.
Whatever value is determined by the appraiser is the value that the lender will use to determine the loan amount that the buyer will be approved for. A licensed appraiser covers the entire property, including the house itself, the land, and any additional structures on the property. Factors that affect the appraisal include:
- Square Footage
- Number of Bedrooms
- Number of Bathrooms
- School District
- Home Interior Features
- Age of Home
- Unique Features
- Property Views
- Improvements or Upgrades
- Swimming Pools and Landscaping
If you fail to make repairs or improvements to your property or fail to point out upgrades and improvements to the appraiser, it could result in a lower appraisal. Prospective buyers will use a home inspector to take a look at the property as well. It’s important to note that inspections and appraisals are two different processes, conducted for different reasons.
Preparing for an Appraisal
Preparing for an appraisal is a lot like staging for an open house. In fact, if you approach the appraisal the same way, you can maximize the reported value of your home. Remember as well that most buyers are more interested in buying a move-in ready home.
An appraiser is different from an inspector. They are interested in the nuts and bolts of your home; its best features and how it compares to others.
- Clean the House
- Trim Landscaping and Drive
- Improve Curb Appeal
Attracting potential buyers:
More than 90% of homebuyers begin their search online. They look at homes listed on national MLS portals or on local realtor sites. Some other things that you can do are:
- Spread the word via neighbors, co-workers, and friends
- Make furniture or quality appliances part of the deal
- Share your listing on social media
- Use a professional real estate photographer for listing photos
- Hire an agent with an excellent track record
To renovate or not to renovate?
The answer is that it’s really subjective, but a few tips will help you decide.
For the most part, minor improvements like paint or a new front door can do more to improve the value of your home than a complete renovation.
· Fix the HVAC, repair floors, and clean out the basement or garage if you want to make a big improvement.
Should I Use a Stager?
Buyers form a snap judgment about your home if things are untidy and out of order, so you should definitely make sure it’s spotless. However, to truly stand out, you want better than just a clean home. You could have a perfectly tidy house but it’s the overall aesthetics that will make or break a sale.
Here’s how you can get started with sprucing things up if you don’t want to call a stager yet:
- Clear out the clutter
- Cut the hedges
- Hose the driveway
- Plant fresh bulbs
- Wash ceiling fans and light fixtures
- Put away clothes and shoes
- Add lighting and accents
- You are well on your way to happy home selling