Comparative market analysis: how agents build a CMA

A comparative market analysis is an agent's estimate of what a home will sell for, worked out from recent sales of similar homes nearby and adjusted for the ways they differ. It is not an appraisal: it is the evidence behind the listing price you recommend. This guide walks through the five steps, with a full adjustment grid you can copy.

It is part of our guide on how to get real estate listings: the CMA is the document that backs your price when you meet the seller.

What a CMA is, and what it is not

Sellers hear four names for "what is my home worth". They are not the same thing.

The Texas regulator puts the line clearly: an appraisal is prepared by a licensed or certified appraiser under USPAP and is used in mortgage finance and in courts, while a broker's price opinion "is not an opinion of market value" and is meant to help set a listing price (TALCB, 29 Dec 2021).

Some states put that line in writing. In Texas, any written estimate of price by a license holder must carry a set disclaimer, word for word and in at least 12-point type, which begins: "This represents an estimated sale price for this property. It is not the same as the opinion of value in an appraisal..." (22 TAC 535.17, Cornell LII). Check whether your state has a similar rule before you hand a CMA to a seller.

Step 1: Record the subject home

The subject is the home you are pricing. Note only what will move the numbers later:

• Living area, and how you measured it. Our guide on how to measure square footage covers what counts.
• Bedrooms and bathrooms, full and half.
• Lot size and anything unusual about it (corner, slope, backs onto a busy road).
• Garage or parking.
• Condition by room: original, updated, renovated, with the year of each update.
• Big-ticket items: roof, windows, heating and cooling, with their age.
• View, noise and outlook.
• HOA fees and special features (pool, accessory unit, solar).

Photograph what changes the price: the dated kitchen, the new roof, the cracked driveway. When the seller asks why you took $20,000 off a comp, you can show the reason instead of describing it.

Step 2: Choose the comps, from four lists

Most guides tell you to pull "recent sales". Pull four lists instead, because each answers a different question.

Closed sales carry the weight. Appraisers on loans sold to Fannie Mae must report "a minimum of three closed comparables", should use sales "closed within the last 12 months", and should use sales from the same market area "when possible"; contracts and listings serve only as support (Fannie Mae Selling Guide, B4-1.3-08). That is the appraiser's standard, not yours, but it is a useful benchmark: the appraiser on a loan that will be sold to Fannie Mae will be held to it.

To pick the closed sales:

• Same area first. Use the real boundaries buyers care about (school zone, the main road, the river), not a circle on a map.
• Similar size and age. The fewer the differences, the fewer the adjustments.
• Recent first. Go further back only when you must, and adjust for time.
• Drop unusual sales (a sale between relatives, a distressed sale) unless you can measure and adjust for the difference.

Keep the set small. Three to six good comps beat ten loose ones.

Step 3: Adjust each comp to the subject

This is where a CMA earns its name. The rule that decides every sign in the grid:

You adjust the comp, never the subject. If the comp has something the subject lacks, subtract its value from the comp's price. If the comp lacks something the subject has, add it.

Here is a worked grid. The homes and every dollar figure are made up for this example.

Check the arithmetic: Comp A is $462,000 plus $5,000 for 50 square feet it lacks. Comp B is $441,000, minus $5,000 for its extra 50 square feet, plus $15,000 for the garage it lacks. Comp C is $478,000 minus $20,000 for the renovated kitchen the subject does not have. The three adjusted prices run from $451,000 to $467,000, much closer together than the raw prices ($441,000 to $478,000). That convergence is the sign the adjustments are sound.

A note on the area rate: the dollars you add or subtract for each extra square foot are usually smaller than the home's average price per square foot, because a bigger home is not worth proportionally more. Our article on price per square foot explains why.

Where the dollar figures come from

The garage figure in the grid comes from paired sales. Say two homes sold three weeks apart on the same street, same model and same size: one with a 2-car garage at $455,000, one without at $440,000. In that street, buyers paid about $15,000 for the garage. Before that figure goes in your grid, look for a second pair a few streets away; if it lands close to $15,000, you can defend it to the seller.

That is the standard appraisers work to. Fannie Mae says adjustments "must reflect the market's reaction" to the difference, and a rule-of-thumb figure is wrong when the market shows a different one (Selling Guide, B4-1.3-09). The same page covers two more adjustments you will meet:

• Time. If prices moved since a comp sold, adjust for it, using a price index, paired sales or a model. Recent contracts are likely to need none.
• Seller concessions. If a comp's seller paid the buyer's closing costs, its price overstates what the home was worth. Adjust it down. For appraisers, "Positive adjustments for sales or financing concessions are not acceptable."

Step 4: From adjusted prices to a list price

Do not simply average the adjusted prices. Give the most weight to the comp that needed the least correcting. In the grid, Comp A needed $5,000 of adjustments; B and C needed $20,000 each. If you give A half the weight and B and C a quarter each, you get about $460,750, inside the $451,000 to $467,000 range and closer to A.

The total of adjustments, ignoring their sign, is your confidence signal. Fannie Mae sets no limit on net or gross adjustments for appraisers (B4-1.3-09), but for you a comp that needs large corrections is a weak comp. Say so in the CMA rather than hiding it in the average.

Then read the market around the number:

• Months' supply: how long the current inventory would take to sell at the current pace of sales (NAR). Rising supply argues for the lower half of your range.
• Your actives and expireds from step 2. If the actives are priced above your range and not moving, and the expireds sit at the top of it, the top of the range is already tested.

The list price itself is a strategy decision inside or near the range. How you present it to the seller is covered in our listing presentation guide. The CMA also gives the price line of the seller's net sheet.

Step 5: Put it on one page

A seller reads one page. Use this layout:

1. The home: address, living area and how it was measured, the features that matter, the date of your visit.
2. The grid from step 3, with each comp's source and sale date.
3. Active and expired listings, with list price and days on market.
4. The range and the price you recommend, in one sentence each.
5. What would change it: repairs, a new sale nearby, a shift in supply. Add a date to review it.
6. The disclaimer your state requires, or a plain line: "This is a market analysis to help set a listing price. It is not an appraisal."

Vistura has the area work built in as a free tool. The home square footage calculator adds the subject room by room, in square feet or square metres and with L-shaped rooms, and keeps the garage and other areas apart from the living area. Fill in the "Asking price (optional)" box and it shows the price per square foot; "Copy as text" puts the room list into your CMA. The real estate commission calculator then shows the seller's net at the price you recommend. Neither needs an account.

The CMA explains the number, but buyers respond to the rooms. Bring a 360 tour of a home you marketed, so the seller sees how buyers will walk through theirs; the listing presentation guide covers when to show it.

When the seller needs an appraisal instead

A CMA is enough to set a listing price. It is not enough when the number has to hold for someone else:

• A lender. The buyer's lender orders its own appraisal anyway.
• A court, a divorce, an estate or a tax filing. These need a licensed appraiser, the use the Texas regulator names for appraisals (TALCB).

Some sellers order a pre-listing appraisal to settle an argument about price. It costs them money, and it does not replace your view of the competition they will face.

When a home has no real comps (an unusual design, a rural property, the top of the market), say so in the CMA and suggest an appraiser.

After the listing: check the CMA against buyers

The review date on your CMA is when you check the price against what buyers do. Vistura's "Owner report" sends the seller the tour's visits and contact requests, by email or as a PDF, on every plan; on Pro it adds where visitors came from, the rooms they looked at most, time in the tour and your logo (see the plans). If the tour gets visits but few requests by the review date, buyers are looking without acting, and that usually points to the price.

A good CMA comes down to close comps, adjustments with a reason behind each dollar, a range, and one page the seller can read. Start the next one by measuring the subject with the square footage calculator.

Frequently asked questions

How many comps should a CMA have?

There is no fixed number for agents. Three to six close comps usually beat ten loose ones. Appraisers on loans sold to Fannie Mae must report at least three closed sales, which is a sensible floor.

Is a CMA the same as an appraisal?

No. A CMA is an agent's estimate of the sale price, used to set a listing price. An appraisal is an opinion of market value by a licensed appraiser under USPAP, and it is what lenders and courts rely on.

Should I include active listings in a CMA?

Yes, but not to set the value. Active listings are the homes your seller competes with today. Closed sales set the value; actives show what the buyer will compare against.

How far back should comparable sales go?

Use the most recent sales first. Fannie Mae asks appraisers to use sales closed within the last 12 months, which is a useful line. Go older only when there are no recent sales, and adjust for how prices moved since.