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COMPARATIVE MARKET a___YSIS (CMA)

The comparative market a___ysis (the OREA Standard Form #260 is t__led Residential Market Comparison Guide), is not designed to estimate market value, but rather to establish a realistic listing price. The CMA is not an opinion of value, but a tool used to competitively market the property.

This informal a___ysis is typically completed by a salesperson using available MLS and exclusive office sale, sold, and expired data. The CMA can be an effective mechanism to inform sellers about market conditions. The CMA should be updated as required.

Contents
Some CMA forms include estimated selling price, transaction costs, and estimate of net proceeds. Caution is advised regarding the latter. Any estimate of net proceeds should include a fully detailed disclaimer, e.g., that costs are typical, the information is provided for illustration purposes only, and the seller's actual net may vary significantly based on individual circumstances and situations arising from the transaction.

MLS systems also typically provide a standard CMA template to enable salespeople to set parameters for sold, for sale, and expired properties within a defined area of the subject property.

Market memo

The E-CMA

The Internet has brought about revolutionary changes in how business in done. Increasingly sophisticated electronic CMAs are appearing that serve both buyers and sellers. With basic information about a specific property, these databases can produce:

Listing of all sales within a defined area.
Property specifics for each sale
Mapping of sales in relation to subject property.
Detailed a___ysis of the most comparable sales.
a___ysis of key sale characteristics, e.g., square footage, a__essed value, number of bedrooms, etc.
Market trend a___ysis, e.g., average prices over the past 10 years.
Demographic details of residents in the area.
School profiles.
Retail establishments within defined trading area.
The Internet poses both challenges and opportunities for real estate professionals.

CMA Focus

The True Cost of Overpricing

The CMA brings reality to a listing presentation. However, sellers may still insist on overpricing in hopes of getting more than true value. Here?s some compelling arguments not to do so:

Buyers are good appraisers. After all, their dollars are being invested.
The seller misses those who are truly motivated. A buyer looking in the $170,000 range would probably
not look at a $200,000 house, as he/she a__umes it could not be bought for less.
Salespeople use the property for comparison shopping to highlight the true value of other listings.
Advertising costs are wasted as ads attract buyers looking in a higher price range.
Low interest and unfavourable responses extend the time to sell the property.
The property remains on the market longer giving the impression that something is wrong.
The property becomes market stale as buyers and salespersons lose interest.
The listing price may have to be reduced lower than true value to finally attract buyers and get a sale.
Remember: A well-listed home is half sold.

Residential Market Comparison Guide

Study Links

Encyclopedia

Appraisal
Appraisal Institute of Canada
Comparative Market a___ysis

Appraisal

In real estate appraisal, depreciation refers to any decline in the value of a physical a__et resulting from physical deterioration (ordinary wear and tear), and functional/ external obsolescence. Appraisers rely on two perspectives regarding depreciation. In the cost approach to value, accrued depreciation is calculated, while in the income approach to value, accruals for depreciation are used. For a detailed a___ysis of depreciation relating to deterioration and obsolescence, see Accrued Depreciation.

Appraisal

The act or process of estimating value. The resulting opinion of value derived from the appraisal may be informal, transmitted verbally, or it may be formal, presented in written form. Usually, it is a written statement setting forth an opinion of the value of an adequately described property as of a specified date, supported by the presentation and a___ysis of relevant data.

Appraisal Institute of Canada

Acronym: AIC

The Appraisal Institute of Canada, founded in 1938, is the national society of professional real estate appraisers. The Institute is dedicated to serving the public interest by advancing high standards for members of the appraisal profession through the granting of professional designations.

Practising members provide reasoned valuations widely respected by courts, chartered banks, real estate corporations, trust companies, mortgage and lending institutions, all levels of government, and private individuals. Members are governed by a Code of Ethics and Uniform Standards of Professional Appraisal Practice that establish minimum standards of performance in the rendering of professional services. The Institute's education program is available through most of its provincial a__ociations and chapters. Certain universities and colleges also offer the program on a full-time basis.
Reference

The national office of the Appraisal Institute of Canada is located at 203-150 Isabella Street, Ottawa, ON K1S 1V7. Provincial offices are maintained in all provinces.

Comparative Market a___ysis

(see also Residential Market Comparison Guide)

Acronym: CMA

An a___ysis used by real estate practitioners to a__ist the seller in comparing his/her property with others in the marketplace in order to establish a listing price. The comparative market a___ysis is not designed to establish market value.
Application

The CMA form typically includes homes that are currently for sale, have recently sold, or on which listings have expired or did not sell in a defined time period. This information provides the seller with an indication as to what buyers are prepared to pay, given current market conditions. The CMA is a valuable tool for salespeople when properly informing sellers regarding market conditions and obtaining saleable listings. No standard format for the CMA in Canada exists and content varies among brokerages, regions, and provinces.
Provincial

See applicable reference materials.

Residential Market Comparison Guide

A form designed to show the owner of a property how his/ her property ranks in competition with others that are now, or have been, on the market. Often referred to as a CMA (Comparative Market a___ysis) in various jurisdictions in Canada, this guide is used to determine the probable asking price of the property. The form also contains additional lines to detail anticipated selling price, selling costs, and ultimately estimated net proceeds to the seller.