2547 Lititz Pike, Lancaster, PA 17601 (717) 299-4885
Comparative (or comparable) Market Analysis
Don’t want to pay too much for a home? Want to be sure that you aren’t paying more than market value for your home purchase? A CMA – Comparative (or Comparable) Market Analysis – is the strongest tool in your home-buying arsenal to help assure you’re paying a fair price. A CMA recaps housing activity in the area in which you are interested, focusing generally on three that are similar in size and amenities located in the same neighborhood or nearby. The CMA will list specific details (number of bedrooms, number of baths, total room count, square footage, age, etc.) for similar properties that are currently on the market (active listings); are under contract but not yet closed (pending listings); have closed and transferred ownership (sold listings); along with those listings that have either expired without selling or have been withdrawn by the seller (taken off the market). Because a CMA compares similar properties, it can give you a pretty clear snapshot of current housing values in a specific housing market. Although the CMA is very important, it cannot be used as an absolute determination of value, since it generally does not put a lot of weight on condition, an obviously important factor.
While the CMA will list homes that are currently on the market as well as those that are pending or have expired, it is those properties that have sold and closed that give the most information. This information is important because it details specifically what buyers are willing to pay (and lenders are willing to lend for specific properties. Don’t make the mistake of putting too much weight on the prices of properties currently on the market. These homes could be wildly overpriced compared to the price for which they eventually sell. Likewise, one of the biggest reasons that a property listing will expire without selling is because it is overpriced. So take the prices of these expired listings with a grain of salt.
A CMA can be your most important tool in negotiation, since it will detail exactly where, price-wise, the house in which you are interested is positioned. Is it underpriced (a bargain), priced "on the money" (a fair price for both buyer and seller) or overpriced (time to either negotiate hard or walk away).
Remember, if you overpay for a home in a strongly appreciating market, the
market will eventually cover your mistake. If, however, you overpay in a
flat or declining market, you will end up holding the financial bag.
