How to Do a Real Estate CMA

24 Hour Property Appraisal Emulations

How to Do a Real Estate CMA

For Free – No Strings Attached

Normally, we specialize in selling our U.S. Home Value Reports to homeowners and real estate investors to aid them in their preliminary decision-making process regarding buying and selling residential property. But in this article, we’re actually going to show you how to perform your own version of a home value report called a comparative market analysis (or CMA). You won’t need to buy anything because we will show you some tricks on how to get a reasonable value with publicly available information from any one of your favorite real estate websites. So grab a calculator, and let’s do some math.

Don’t Sweat It

We’ve got to be honest. When we perform an analysis of a subject property for our clients, it gets very complicated (and it’s very proprietary). So don’t get discouraged when you start to realize how many different variables can affect a property’s value. Consider this article a simplified approach that you can use as a homeowner or homebuyer to determine a reasonable market value. It’s no secret that we sell reports, so our service is always available if wish to use it.

Step 1: Research the Subject Property

The first step is to research your subject property first. You’re going to need to know the following information:

  • Living Area Square Footage
  • Lot Size

And that’s it.

But What About the Number of Rooms?

Values aren’t determine by the number of rooms unless the property has really peculiar characteristics. So, yes, a 3 bed 2 bath home can be the same value as a 2 bed 2 bath home with the same square footage.

Ok, Then What About Amenities and Features?

One step at a time, after you calculate the initial value, you can then go back to add or subtract based on any notable characteristics of other properties like each property’s age, pool & spa, recent renovations, and so on.

So let’s get you to perform the basic calculations first and then you can refine them accordingly.

Step 2: Research Comparable Sales

After you get the Living Area Square Footage and lot size, you now need to do the same for 3 to 5 comparable properties, but also include the sales price. Comparable properties are approximately the same size and age (whenever possible) that have sold in the past 3 months and are located within a mile radius of the subject property. For less active markets, you can extend the radius and time frame of your search.

Note: Calculations become more complex when you have to go back further in time because then you have to adjust for appreciation. For example: A property that sold a year ago for $300,000 in a market that’s appreciated 20% in the past 12 months, would then need to have its sales price adjusted to $360,000.

Again, like we said, it can get complex, but you’ll at least have a better idea about the value of your subject property than what many real estate websites estimate.

Step 3: Perform CMA

Now that you’ve got all of your numbers. Here’s how you perform a basic comparative market analysis. For our example, we will use one subject property with 3 comparable sales that have recently sold. This way, we will avoid complicating matters with several adjustments for appreciation and the endless list of other variables like pools, recent updates, and so on. Otherwise, this relatively short exercise could turn into a semester-long class.

Subject Property

So our subject property example has 2,340 sq ft and sits on a quarter of an acre (.25)

Subject Property
Living Area2,340 sq ft
Lot Size.25 acre

Comparable Sales

And our comparable sales (also known as comps) have the following characteristics:

Comp 1Comp 2Comp 3
Living Area2,199 sq ft1,978 sq ft2,149 sq ft
Lot Size.24 acre.27 acre.26 acre
Sales Prices$540,000$520,000$502,000
Comparable Properties

Determine the Cost Per Square Foot

Starting with Comp 1, let’s determine the cost per square foot. You can easily do this by dividing the sales price of $540,000 by it’s living area of 2,199 sq ft. This will give us an approximate $246 p sq ft.

Comp 1: $540,000 ÷ 2,199 sq ft = $246 per sq ft
Comp 2: $520,000 ÷ 1,978 sq ft = $263 per sq ft
Comp 3: $502,000 ÷ 2,149 sq ft = $234 per sq ft

So which “cost per square foot” should you use?

Well, that depends on how similar any of those properties are to your subject property. For example: If you find Comp 2 exhibits the same age, updates and amenities like it’s basically the twin sister of your subject property, then by all means, use $263 per sq ft to estimate your subject property’s value.

So you would take that cost per square foot $263 and multiply it by the living area of your subject property which in our example was 2,340, and that gives us an estimated value of $615,420.

Comp 2 $263 per sq ft x 2,340 sq ft = $615,420
Single Similar Comp Approach to Cost Per Square Foot

But if you’re unsure and haven’t seen interior photos or seen any agent notes, then it’s best to average the 3 comps together by adding all of the prices per square foot together and divide by 3. This would give you an average cost per square foot of $248.

Comp 1 $246 per sq ft + Comp 2 $263 per sq ft + Comp 3 $234 per sq ft ÷ 3 = Average $248 per sq ft
Averaging Several Comps Approach to Cost Per Square Foot

Calculating the Estimated Value

Then you would take that cost per square foot $248 and multiply it by the living area of the subject property 2,340, and that gives us an estimated value of $580,000.

Subject Property $248 per sq ft x 2,340 sq ft = $580,000
Calculating the Estimated Value

Once again, this is a very simplified version of a comparative market analysis. You can always add so many other variables into the equation and make adjustments between comps based on age, lot size, and amenities.