Comparable Market Analysis (CMA)
By Jim Palmer Jr.

Many real estate brokers offer free market analysis of homes or property as a “loss leader” to encourage sellers to connect with them when the time comes to sell. The term “loss leader” refers to a retail store method intended to lure buyers into a store by selling some staple item at a price well below the cost to the store, hoping that the customers will also purchase items that are priced well above the store’s cost while they shop.

On average a market analysis costs the broker approximately two hours of their time and energy, depending on the complexity of the project. Many brokers offer this time for free with the hope that the home owner will eventually use them to sell the property. Brokers also do market analysis for a price, especially when it is for an estate or a divorce, when there is virtually no chance that they will get the opportunity to make a commission at a later date. The average cost for such an analysis can vary between $100 and $400, which is about ½ the cost of paying an actual licensed appraiser for basically the same work.

A market analysis is done generally the same way an appraisal is done, by finding sold, pending and sometimes actively listed properties to compare to the subject property in order to estimate the approximate current market value. That is not an exact science! It is not fact. It is only an opinion of value based on research and the broker’s interpretation of the data. It’s likely that if you had three brokers or three appraisers do an analysis of the same property, you’d get three different results, though they would probably be in a similar value range.

When brokers have to use properties that are not exactly alike for that comparison, adjustments are made to compensate for value that one property may have that another does not have, such as when the homes are very similar in size and amenities but differ in acreage size. Brokers calculate the differences and add or subtract accordingly until they come up with a number that represents the approximate value the home could sell for. Most brokers use a minimum of 3 sold properties and after adjusting for the differences, calculate an average value for all of the comparables combined. This gives a general indication of value and a starting point for determining an offering price.