What Is Comparative Market Analysis (CMA) in Real Estate?

What Is a Comparative Market Analysis?

A comparative market analysis (CMA) estimates a home's price based on recently sold, similar properties in the immediate area. Real estate agents and brokers create CMA reports to help sellers set listing prices for their homes and help buyers make competitive offers. In addition, you can perform your own comparative market analysis by researching comparable properties (known as "comps") on real estate listing sites, such as realtor.com.

Key Takeaways

  • A comparative market analysis (CMA) is an estimate of a home's price used to help sellers set listing prices and help buyers make competitive offers.
  • The analysis considers the location, age, size, construction, style, condition, and other factors for the property and comparables.
  • If you're a buyer or seller interested in a CMA for a specific property, ask a local real estate agent or broker for help, or do your own research by comparing homes online.

Click Play to Learn How to Conduct a Comparative Market Analysis

Understanding Comparative Market Analysis

A comparative market analysis helps sellers choose the best listing prices for their homes. The "best" price is one that's not so low it leaves the seller in more debt or so high the home won't sell. For buyers, a CMA can verify if a home is in the right price range and help pinpoint a competitive offer that will be taken seriously—without going overboard.

A CMA compares a property to other homes similar in location, size, and features. Ideally, a CMA uses recently sold homes from the same subdivision. Of course, finding homes that sold within the last three to six months in the immediate area can be difficult if you're in a low-volume or rural real estate market. In these cases, a formal appraisal might be a better option.

A comparative market analysis is a price estimate, so real estate agents and brokers don't need an appraiser's license to perform a CMA while serving clients.

What's in a CMA Report?

When a real estate agent or broker conducts a comparative market analysis, they will create a report that details the findings. There's no standardized CMA report; however, it's important to note that some states have statutes that require specific information be included in CMAs.

That said, a CMA typically includes:

  • The address of the property and three to five comparables
  • A description of each property, including elevation, floor plan, and the number of bedrooms and bathrooms
  • The square footage of each property
  • The sales price of each comp
  • Dollar adjustments for any differences
  • The adjusted sold price per square foot of each comp
  • A reasonable price range for the property

CMA vs. Appraisal

A CMA is completed by a real estate agent, the seller, or the buyer using comparable homes to estimate a price. This estimated price can then be used for negotiating a sales price.

An appraisal requires a state-licensed and certified appraiser. The appraiser compares homes similar in size, layout, and location. Then, they evaluate housing market conditions and generate a report with the home's market value. The appraisal value is used by lenders to establish the amount a buyer is approved for.

The key difference is a CMA establishes a home's price, whereas an appraisal establishes its value—price is what you pay for something while value is what it is worth.

How to Do a Comparative Market Analysis

A CMA involves much more than just comparing the prices of recently sold homes in the area. Here's a rundown of the basic steps for creating an accurate CMA:

1. Evaluate the Neighborhood

To set the right listing price—or ensure a home you're interested in is a good deal—the CMA should consider the neighborhood's general quality. For example, it should consider the more attractive blocks and address community amenities, nuisances, and HOA rules. Equally important for inclusion are school proximity and curb appeal.

2. Gather Details About the Property

If a real estate agent or broker does the CMA, they will review the existing listing (if there is one) and make an in-person visit to gather information about the home. They'll take note of the home's size (particularly the liveable space), age, style, construction, condition, layout, finishes, landscaping, upgrades, and updates. 

3. Select Comps

Find three to five comparable homes in the area that have sold recently, as close to the home as possible. Ideally, the comps will be within one mile of the property and in the same school district. Focus on similar houses in terms of square footage, lot size, bedrooms, bathrooms, and type of construction. Pay close attention to when the comparable property sold: The more recent, the better—real estate prices can fluctuate rapidly.

The comps should have the same placement if the home has a unique location—such as overlooking a golf course or the waterfront.

4. Adjust for Differences

The next step is to adjust for differences between the home and each comparable property. An experienced real estate agent or broker can assign a price to each of the differences and adjust the price of each comp accordingly. It may seem counter-intuitive, but if the comp has an inferior feature, a positive adjustment is made to the price of the comp, and vice versa.

For example, if a comp has an extra bedroom (a superior feature), it is reasonable to assume that the buyer paid more to get the extra bedroom. In this case, you would deduct an amount from the comp to account for the extra bedroom, thereby allowing an apples-to-apples comparison. Therefore, the price of the target home is never adjusted.

5. Determine the Price Per Square Foot After Adjustments

After adjusting for differences, divide the adjusted price of each comp by its square footage to determine the sold price per square foot. Next, add the sold price per square foot of all the comps, and divide by the number of comps to get the average. Finally, multiply this average by the square feet of the property to estimate its price.

Example of a Comparative Market Analysis

Many real estate agents and brokers use software to generate comprehensive (and professional-looking) CMA reports. If you plan to create your own, use a spreadsheet to keep track of your research, or try an online home-price tool offered by one of the real estate listing websites. Below is an example of a CMA report.

Comparative Market Analysis chart
A sample report.


Is a CMA as Good as an Appraisal?

A comparative market analysis can reveal a property's fair price range; however, it is not considered by lenders or real estate experts to be as good or accurate a method as an appraisal by a licensed and certified appraiser.

What Does a CMA Include?

A CMA generally compares a home's location, size, age, style, materials, and condition against similar homes sold within the last six months to arrive at an estimated price.

What Is the Purpose of a CMA?

A CMA allows sellers to establish a fair asking price; it lets buyers see if the seller is asking a reasonable price for the home.

What Is the Biggest Difference Between a CMA and an Appraisal?

A comparative market analysis can be done by agents, brokers, buyers, or sellers. An appraisal can only be done by a licensed and state-certified appraiser.

The Bottom Line

In general, the best comps are the ones that are the most similar to the home, more recently sold, with the fewest adjustments required. Depending on the market, the final price might need to be tweaked slightly. For example, if the market is hot or inventory is low, the price might be slightly higher. Conversely, if there are many similar homes on the market, the price might have to come down to be competitive.

Article Sources
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  1. North Carolina General Assembly. "Article 6. Broker Price Opinions and Comparative Market Analyses."

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