The Comparative Market Analysis, commonly known as the CMA, is a way to estimate the market value of a property by comparing it to other similar properties that have sold recently. Adjustments are made for differences between the properties and an indicated value for the subject property derived by taking the comparable property’s sales price and adding or subtracting for the differences. At least 3 comparable properties are typically analyzed and an estimated value for the subject derived from considering all of the indicated values, although not always equally. This is similar to what an appraiser does, but not subject to the same formal rules governing appraisals. In North Carolina, real estate brokers are permitted to do CMAs, but an appraisal license is required to perform appraisals.
The free CMA is a standard offering by real estate agents trying to win listings. The promise of a free CMA is a hook used by many web sites to get contact information from home owners, which is then sold to real estate agents as leads. The agent then contacts the owner to complete the CMA and hopefully win the listing. Zillow provides free “Zestimates” on line for just about any residential property whether it is for sale or not. So what is a free CMA worth?
Anyone who has spent much time on Zillow looking at Zestimates knows that their free product is generally worth about what it costs. Based on public record information with no type of inspection of the subject property or comparables, Zestimates range from reasonably accurate to bearing absolutely no relationship to reality depending on the property involved and the accuracy of the public record information available. Relying on a Zestimate as an accurate indication of value is a dicey proposition at best and Zestimates are typically only referred to by buyers or sellers when they suit their specific purposes (over market for sellers, under for buyers).
So what about free CMAs prepared by real estate agents? Again the accuracy can vary substantially. Vendors of Multiple Listing Service software typically include automated CMA functions as apart of their package. These CMAs are prepared in a similar way to a Zestimate, but instead of using public record information, they rely on MLS information, which is often far more accurate and detailed than public record information regarding both the property (square feet, amenities, upgrades, etc) and the details of the sale (closing costs paid, repair concessions, etc.). Agent prepared CMAs relying solely on an automated valuation method using MLS data can be more accurate than a Zestimate, but can also fail to consider information that is not easily incorporated into an automated method.
A more accurate agent prepared CMA results from some actual human intervention into the process. There are still a number of hard to automate details regarding most properties and intangible aspects that require some actual thought, experience and consideration in order to quantify their impact on value. This is not true for every property. A home in a neighborhood of homes all built by the same builder with only a few different floor plans and many recent sales is a much easier CMA to do than a unique property with few comparable property sales to consider, and one which an automated valuation can be substantially accurate. A CMA prepared with the input of considerable thought by an experienced agent will tend to be more accurate than an automated one, but the incentives of the agent also need to be considered. An agent in competition with other agents all offering similar services for a similar price knows that a homeowner is likely to favor the agent who tells them their house is worth the most money, so there is a natural tendency among many agents to use the CMA to indicate a higher value than what an objective analysis might indicate. Not all agents will do this, as many understand that having overpriced listings is not necessarily a good way to run a successful real estate brokerage, but there are probably just as many who think that any listing is a good listing and that overpricing a property upfront to secure the listing can be overcome by price reductions later when the homeowner realizes the initial asking price is not realistic.
As a broker who offers alternatives to traditional brokerage models and bases pricing for services on the needs of each particular owner, Goddin Real Estate does not typically offer a free CMA as a pre listing service. We will research the property and comparable sales in order to be able to intelligently discuss options with the seller and in situations where a value is readily apparent we will offer a preliminary opinion as a part of the pre listing discussion. Many CMAs, though, require much more than just a cursory glance at the subject property and market data and in those situations we feel like it is not fair to overcharge our paying customers for services in order to make up for any free CMAs provided to customers who end up not being paying customers. In some situations we may also recommend that an appraiser be hired to provide their particular level of expertise for difficult to evaluate properties. GRE offers extremely high quality listing services with the goal being to help the seller sell their property for the best price in the shortest time. We also understand that the market sets the market value for your property, not the broker or the seller. We will always strive to advise sellers and market property to ensure that full market value can be obtained, but we do not offer free services that may eventually have to be paid for by someone else. In that way, we are able to offer better pricing to those who are our actual customers and clients.