Comparative Market Analysis

Definition of 'Comparative Market Analysis'


An examination of the prices at which similar properties in the same area recently sold. Real estate agents perform a comparative market analysis for their clients to help them determine a price to list when selling a home or a price to offer when buying a home. Since no two properties are identical, agents make adjustments for the differences between the sold properties and the one that is about to be purchased or listed to determine a fair offer or sale price. Essentially, a comparative market analysis is a less-sophisticated version of a formal, professional appraisal.

Investopedia explains 'Comparative Market Analysis'



For example, a couple might be considering writing an offer on a four-bedroom, three-bathroom, 2,100-square-foot, single-family home on a quarter acre of land. The house is listed for sale at $300,000. The couple’s real estate agent performs a comparative market analysis and locates three similar properties that recently sold in the same subdivision. The first is identical in every way to the subject property except that it is located on a busy road; it recently sold for $275,000. The second has four bedrooms, three bathrooms, and is located on a quarter acre of land but is 2,400 square feet because it also includes a screened-in porch; it sold for $315,000. The third has four bedrooms, is located on a quarter acre of land and is 2,100 square feet, but it only has two bathrooms, both of which are outdated; it sold for $265,000. Based on the differences in the properties examined in the comparative market analysis, the real estate agent determines that $300,000 is a fair listing price. Her clients decide to offer $290,000 in the hope of negotiating with the sellers to purchase the property at $295,000.
 
A comparable market analysis can also include currently listed properties, especially if no similar properties were recently sold. However, listing prices only indicate what the seller hopes to get for the property and do not necessarily reflect what it is actually worth.




comments powered by Disqus
Hot Definitions
  1. Benchmark Bond

    A bond that provides a standard against which the performance of other bonds can be measured. Government bonds are almost always used as benchmark bonds. Also referred to as "benchmark issue" or "bellwether issue".
  2. Market Capitalization

    The total dollar market value of all of a company's outstanding shares. Market capitalization is calculated by multiplying a company's shares outstanding by the current market price of one share. The investment community uses this figure to determine a company's size, as opposed to sales or total asset figures.
  3. Oil Reserves

    An estimate of the amount of crude oil located in a particular economic region. Oil reserves must have the potential of being extracted under current technological constraints. For example, if oil pools are located at unattainable depths, they would not be considered part of the nation's reserves.
  4. Joint Venture - JV

    A business arrangement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task. This task can be a new project or any other business activity. In a joint venture (JV), each of the participants is responsible for profits, losses and costs associated with it.
  5. Aggregate Risk

    The exposure of a bank, financial institution, or any type of major investor to foreign exchange contracts - both spot and forward - from a single counterparty or client. Aggregate risk in forex may also be defined as the total exposure of an entity to changes or fluctuations in currency rates.
  6. Organic Growth

    The growth rate that a company can achieve by increasing output and enhancing sales. This excludes any profits or growth acquired from takeovers, acquisitions or mergers. Takeovers, acquisitions and mergers do not bring about profits generated within the company, and are therefore not considered organic.
Trading Center