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E - Asking Price: THE best source for an asking price?

A CMA is the best pricing source 

A CMA (Comparative Marketing Analysis) is the term applied to the process real estate agents use to provide their opinion of a property's value. The agent usually accompanies this no-obligation, evaluation estimate with a suggested listing price. CMAs can provide the best source for the asking price.

Why a CMA is valid:

A CMA provides a comparison in value between your home and other homes. These comparisons, or “comps” include:

          Homes that are like yours

This includes similarities in as many ways as possible, including style, age and size. If a lot of homes make a good match, then less obvious characteristics are considered, such as lot size, upgrades and amenities. Using similarities makes for valid apple-to-apple comparisons.   

          Homes that are in close proximity to yours

The location of a home has a tremendous influence on its value. Homes that are physically close to yours are used. This is almost always within a few blocks of rather homogeneous houses. The exception to this is when a home is somewhat unique (log home, contemporary, etc.) and similar homes cannot be found in close proximity.

          Homes that recently sold or are currently on the market

It is imperative that comparisons are made with houses that have timely market activity. The prices of houses that have recently sold give us an indication as to the direction upcoming selling prices will be.

When a CMA is presented, homes "active" (currently for sale) are used for pricing comparisons and consideration. However, considerably less weight is given to the asking prices of these houses that have not sold.   

Why you should get a CMA:

          In the first place, it’s free

Just about every real estate agent will do this for no cost, making it hard for other agents to charge for this service. 

          Agents are happy to do a free CMA for owners

This includes owners intending to sell on their own. Agents know that the majority of owners give up too quickly and will list with an agent. The agent that the owner lists with is almost always one of the agents who gave them a free CMA.

          A CMA is an interview opportunity

If you decide to list your home, you will have this opportunity to see if the agent is a person you feel you could work with or if this is an individual who lacks experience, is pushy or not sincere. A CMA certainly provides an excellent time to find this out. 

During an agent's presentation you’ll hear recommendations on making your home more marketable, how the local housing market is performing and what is needed to complete a sales transaction.

How a CMA stacks up to an appraisal:

Local, experienced agents can provide a more realistic opinion of value (in terms of what someone will pay for a property) than values supplied by an appraiser. 

          Appraisers typically do not specialize in an area

Appraisers are less familiar with a particular neighborhood’s value or the factors and trends that affect local pricing than are real estate agents who concentrate in that area. Rarely have the appraisers actually been in the comparison houses, making them much less attuned to the subtle differences between properties that account for why buyers pay thousands (even tens of thousands) of dollars more for one property versus another.

          However, appraisers offer advantages

The appraiser is more objective than an agent. He or she is not swayed with a potential commission. The appraiser is not trying to impress an owner by providing an inflated value.

Appraisers do not use unsold houses (those still active on the market) as comps when arriving at a property's value.

Then why don't lenders use agents to do the appraisal? Appraisers use standard forms and basically they all use the same criteria for arriving at the value of a property. Agents use similiar comparison properties but also rely heavily on their experience. Banks aren't real excited about gut instinct criteria when loaning hundreds of thousands of dollars.

Appraisers however do make mistakes and these can lead to killing a deal. Find out more in the Close Step, under Appraisers.

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