Comparable Market Analysis for Landlords

A Comparable Market Analysis, or CMA, is one method for determining the price of a residential rental property. It may also be referred to as a comparative market analysis or a competitive market analysis.

Basically, a CMA is an informal estimate of a property's market value. It is normally performed by a real estate agent to establish a reasonable listing price prior to placing the property up for sale.

The sales price for the property is determined by comparing the property to other properties in the area that are similar and that have recently sold, usually within the past several months. Naturally, a CMA that shows more houses sold in the last few months is a better indication of the current market than a CMA with older sales data.

The benefit of a quality Comparable Market Analysis is that it is based on the reality of the market and not opinion. This kind of information obviously provides the most benefit to a seller. Generally, CMAs will list houses in a particular location that:

• are currently on the market,

• have sales pending on them,

• have expired from the market, and

• have been sold.

It is primarily the properties that have sold that sellers really need to be concerned with. This sales data is the most reliable indicator of what the "market will bear" price-wise. Remember, true market value is determined by what a willing and able buyer will pay. Everything above that is wishful thinking!

So, the price that houses are listed for on the market is not always a good indication of what their real value is. Those that have pending sales will only reveal what their list price is (not what they'll sell for), and those that have expired without being sold may indicate that they didn't sell because they were simply overpriced.

Real estate agents normally conduct CMA's because they have easy access to recent sales data for various locations. However, sellers can also perform CMAs by researching the public records at their local courthouse.

Visiting Sunday open houses of similar properties in the area can also provide valuable insight on choosing the correct sales price for your property. You'll also be able to see how the actual condition and quality of the property compares with your property. This will also factor into your pricing strategy.

The same holds true if you're in the market as a buyer. Conducting a Comparable Market Analysis will give you the data you need to establish the true market value of a property. This will allow you to negotiate your purchase offer with the seller.

For more information on comparable market analysis, please visit The Landlord's Library book collection. It's a great source of high-value information on the complete subject of residential landlording.

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