How to Use a CMA Comparative Market Analysis
by Elizabeth Weintraub
Before putting a home on the market or listing with a real estate agent, savvy home sellers obtain a comparative market analysis, also referred to in the industry as a CMA. You’ve probably received direct mail letters or postcards from local real estate agents about CMAs. These pitches offer you a free report to tell you how much your home is worth. Sellers use a CMA to figure out home pricing.
What is a Comparative Market Analysis?
Although reports can vary, from a two-page list of comparable home sales to a 50-page comprehensive guide, the length and complexity of the report depends on the agent’s business practice. However, standard comparative market analysis reports tend to contain the following data:
- Active Listings. Active listings are homes currently for sale. These listings matter only to the extent that they are your competition for buyers. They are not indicative of market value because sellers can ask whatever they want for their home. It doesn’t mean any of the prices are realistic. The offered sales prices do not reflect market value until they sell, and in buyer’s markets, for example, most sell for a lot less.
- Pending Listings. Pending sale homes are formerly active listings that are under contract. They have not yet closed, so they are not yet a comparable sale. Unless the listing agent is willing to share information about the pending sale — and many are not — you will not know the actual sold price until the transaction closes. However, pending sales do indicate the direction the market is moving. If your home is priced above the list price of these pending sales, you could face longer DOM.
- Sold Listings. Homes that have closed within the past three months are your comparable sales. These are the sales an appraiser will use when appraising your home for the buyer, along with the pending sales (which will likely have closed by the time your home is sold). Look long and hard at the comparable sales because those are your market value. You can use 6 months of comps if there are not enough sales to produce a good report with three months.
- Off-Market / Withdrawn / Canceled. These are properties that were taken off the market for a variety of reasons. Usually, the reason homes are removed from the market is because the prices were too high. The median prices of this group will almost always be higher than the median prices of comparable sales. However, listings cancel also for the following reasons:
- Seller’s remorse. The sellers decided they cannot part with their home and no longer want to sell.
- Priced too high. Nobody made an offer or the only offers received were low-ball offers, which were rejected.
- The DOM were too long. Agents sometimes withdraw listings so they can put them back as a new listing and entice more buyers.
- Repair requests. The homes were once under contract and after the home inspection, the buyer requested repairs which the seller refused.
- Seller fired the agent. It’s not uncommon for unhappy sellers to fire an agent and hire a new agent.
- Expired Listings This group will reflect the highest median sales price because they did not sell and were probably unreasonably priced. Some of the expired listings could also show up as an active listing, listed by a new agent at a new price. Listings also expire because they were not aggressively marketed or because the home was in need of repairs.
Examining Comparable Sales
Comparable sales are those that most closely resemble your home. It is difficult to compare a tri-level home to a single-story home. Select the homes from this list that are mostly identical to your home in size, shape and condition, such as:
- Similar square footage Appraisers compare homes based on square footage. Larger square-foot homes are worth less per square foot than smaller square-foot homes. The variance among a group of median-priced homes ideally should not exceed more than a 10% to 20% variance in square feet, plus or minus.
- Similar age of construction Ideally, the age of the home — the year it was built — should be within a few years of other comparable sold homes. Mixed-age subdivisions are common. For example, in one area of Sacramento, a subdivision consists of homes built in the 1950s, and then they jump a couple decades to the 1970s. Although the homes are located next door to each other, the homes loaded with character from the 1950s sell for more than their newer Brady Bunch counterparts. If your home was built in 1980, say, and brand new homes up the street are selling for more, you cannot command the same price as a new home.
- Similar amenities, upgrades, and condition Appraisers will deduct value from your home if other homes have upgrades and yours does not. A home with a swimming pool will have a different value than a home without a pool. Pools aren’t worth as much as you think. A completely remodeled home is worth more than a fixer. Homes with one bath are worth less than homes with two or more baths. Deferred maintenance will count against you.
- Location Everybody knows that real estate is valued on “location, location, location,” but have you considered what that means? A home with a view of the city, for example, is worth more than a home facing a cement wall. Homes located on busy thoroughfares are worth considerably less than homes on quiet streets. Compare your home to those in similar locations. If your home sits across the street from a power plant, look for other homes with power plant exposure or those located along railroad tracks, among other undesirable locations.
COMPARE THE SERVICE THEN HIRE THE BEST
Important questions to ask BEFORE hiring a Realtor
- What do you know about this area?
- Are you a full time Realtor?
- How long have you been in real estate?
- How many clients have you worked with this year?
- What is your average Days on Market?
- What is your average list to sales price ratio?
- What tools do you have especially for sellers?
- What areas do you primarily work?
- Will you be showing our home or will it be on a lockbox?
- How do you negotiate deals?
- Do you attend the home inspection?
- Do you handle the inspection negotiations?
- Do you attend the walk-through?
- Do you attend the Closing?
- How do you feel about dual agency?
- What qualities differentiate you from other Realtors?
• Thoroughly deep clean the entire home including ceiling fans, baseboards, oven, and closets
• Steam clean carpets and rugs using a company such as Stanley Steemer
• Consider replacing carpet if stains are prominent
• Consider refinishing hardwood floors if they are really scratched up or show damage
• Buy long white curtains from Ikea and change all curtains to matching white curtains (I believe they are $9.99 for two panels)
• Fix any knicks, cracks or holes in the walls. Repaint if needed. Neutral paint colors only, such as beige, cream or light grey. Pale blues and sage greens are suitable for bathrooms
• Take down all personal photos and any personalized items such as wall hangings, picture frames
• Remove all valuables including jewelry, prescription drugs and password protect all computers to prevent identity theft
• Make sure all light bulbs are working and place the highest wattage bulbs you can safely put in each lighting fixture. Add lamps to any rooms without adequate lighting
• Declutter, declutter, declutter. Your home should no longer look like a home. It should look like a hotel or model home. Remember, it is no longer your home! It’s now the buyer’s home
• Each room should only have one purpose. If you use your dining room as an office and a dining room, remove the office items and put them in storage
• Closets and cabinets should NOT look full. They should look organized and have empty space
• Remove excess and oversized furniture. Remember, the less furniture, the better
• Rearrange furniture to maximize space. Consider pulling furniture away from the walls
• Furniture should be arranged in groupings with a rug anchoring the area
• Make sure the fireplace is clean and have a chimney sweep clean it
• Push all chairs in and set the table
• Consider fresh flowers for the middle of the table or a nice candle
• If you have more than 4 – 6 chairs put the additional chairs in storage
• Remove anything from the dining room that is not food/eating related
• Before showings, set the table
• Remove everything but one or two items from the counters
• Scrub tile, backsplash, counters and the inside of the oven
• Organize the inside of your cabinets and pantry
• Clean and organize your fridge. Don’t forget to wipe down the top of your fridge
• Clean the inside of the microwave
• Replace old caulking around sinks
• Remove stains from sinks
• Hang fresh towels
• Change outdated cabinet hardware and make sure it all matches
• If the kitchen cabinets are outdated, consider painting them white or grey to modernize them
• Clear your office desk of all paperwork and personal items
• Remove anything with your name on it or any other personal information
• Password protect any computers
• Put away all bills, valuables, checkbooks, passports, etc. Consider putting these items in a safety deposit box until your home is sold
• Buy new white bath and hand towels which are only put out for showings
• Take everything off counters except a plant or apothecary jars filled with q-tips, cotton balls, etc.
• Clean out and organize bathroom cabinet
• Buy a portable shower caddy and put anything on the counter you use in it such as your toothbrush, make up, etc. Put it under the sink before each showing
• Scrub tiles and considering regrouting the shower if needed
• Replace old caulking around sinks and bathtubs
• Remove stains from sinks, toilets, and bathtubs
• Keep toilet seat lids closed for showings
• Thoroughly scrub the shower door or consider a new shower curtain
• Make beds before showings
• Put away everything on dressers/nightstands except a few books, an alarm clock, and a lamp
• Organize your closet so that there is one inch of space between each hanging item and so the shelves aren’t full. Store out-of-season clothes
• Laundry hampers should be hidden in the closet out of site
• Have a place to hide pet beds, litter boxes, toys, and food containers during showings
• Arrangements should be made for pets to be out of the home during showings
• Put away all toys
• Hide anything with your child’s name or date of birth on it
• Put away all photos of your child
Exterior and Garage
• Paint the home’s exterior if needed, including trim, doors and shutters
• Check front door, doorbell, address number and a welcome mat
• Power wash the siding and windows
• Inspect the roof and make repairs as needed
• Repair cracks in the driveway and sidewalks
• Sweep the entryway and walkways
• Mow, water and fertilize the lawn
• Trim shrubs and trees and rake the leaves
• Plant colorful flowers and shrubs
• Store any toys or equipment lying on the yard
• Clean up pet droppings
• Clean the gutters and downspouts
• Organize the garage
• Hire a chimney sweep
• Have the outside of windows and your screens professionally cleaned
• Have your furnace and AC tuned up
• Change air filters
• Maintain clean drains by adding a half-cup of baking soda followed by a half-cup of white vinegar. After 10 minutes, flush with boiling water
• Drain or flush water heater
• Test smoke and carbon monoxide detectors when you set clocks back in the fall
• Check windows and doors for weather-tightness and install weather stripping where it’s needed
• Have furnace professionally inspected
• Consider paying for an inspection to be done before listing the home
Remember, Your House Is No Longer Your Home –
It’s Now the Future Buyer’s Home!
Congratulations, your hause is now on the market, and all the hard work you’ve put in thus far should start paying off soon! So far you’ve done a lot of prep work to get your home market ready. Now it’s my job to bring you an offer.
Generally, it takes 36 – 72 hours before we get our first showing request. Centralized Showings Services will text you as soon as they are requested. As much as we’d like to ask for 24 hours notices, we will miss a lot of showing opportunity if we do. It’s not unusual to get showing requests in the AM for that afternoon or evening so when you leave each day, plan to have showings even if we don’t have one on the calendar.
If that is an issue due to pets at home, kids, etc. let me know, and I can require 24 hr notice.
Once a showing request comes in, you can approve it, deny it, or ask for a different day/time.
Remember, the quicker we can get buyers into your place and the fewer showings we have to deny or reschedule, the faster we can get your place under contract. The buyer shouldn’t have to work around our schedule, which is why we always put a lockbox on every property we sell. We want to get buyers in as quickly as possible and, to do that, we need to work around their schedule.
How long are they?
Typically showings last 15-30 minutes. You’ll need to be out 15 minutes before the appointed showing time in case the buyer and his/her Realtor are early. Plan to be out of the home for 45 minutes for each showing request. For example, if a showing is scheduled for 5pm, please be out by 4:45pm and don’t come home until after 5:30pm.
As soon as a showing is finished, the buyer’s Realtor will immediately get an email asking for feedback and if their client is interested in the home. Unfortunately, only about 30% of Realtors take the time to give feedback. If we receive feedback, we will immediately forward it on to you via email to review. Don’t be surprised when we don’t get feedback, and don’t be offended by feedback. We’re looking for that ONE buyer who loves your home. For most, your house won’t be the right fit for various reasons, but we only need to find one.
Lastly, once your home is live in the BLC, I will send you a copy of the listing sheet to review. Please review it carefully and let me know of any errors. Also, if you didn’t like how I phrased something, or feel I left out an important point, let me know. Remember, we’re a team, and I want to get your house sold just as much as you do!
Have any questions?
Call or text: 317.413.1360
Email me: LeeAnnBalta@C21Scheetz.com
Unfortunately, these days it seems scams and rip off artists are around every corner. As Realtors we run across a rental scam almost daily where the scammer has stolen pictures off the internet of a property for rent or sale, sets up their own fake rental on CraigsList using the photos and tries to lure a trusting tenant to rent the property sight unseen. This happens in both the city and the suburbs.
So what can you do as a property owner to protect yourself?
Our best advice is to set up a Google Alert on your home or rental property. Google Alerts are simple and free tools to get regular updates about something that interests you, such as your property and your tenants. Google Alerts will send you an email any time a new web page appears in the top 20 web results or top 10 news results for the terms you specify.
As a homeowner, we also recommend setting up a Google Alert so you can make sure someone doesn’t try run a rental scam using photos of your property.
We also recommend parents set up Google Alerts on each of their children using the child’s full legal name, but that’s another story for another day!
Setting up a Google Alerts is simple. Go to http://google.com/alerts (note that you’ll need to have a Google login to use the service). For each Alert, you need to decide the following:
- Search Terms. This can be as simple as entering the property address in quotations. For example: “3537 Indy Drive.” You may also want to set up another alert if there are alternate ways your address may appear, for example including the abbreviation for “Drive” (making the alert active for: “3537 Indy Dr.”) or including the town (such as: “2201 Indy Dr, Evanston”). Using quotations around the search terms will help filter the results.
- Type of information to search. This tells Google which information to include in its search (Everything, News, Blogs, Web, Video, Groups) Setting this to “everything” will include all types of search results.
- How often the alert should be sent (as-it-happens, once a day, once a week). Google will send notifications only when it actually finds new material in the top 20 (web) / 10 (news) results, so you won’t be getting messages unless there’s something to report.
- Volume. This setting determines how many results you see in each alert.
- How you would like to receive the alerts (email or via RSS feed). For each alert you create, a separate email will be sent depending on how often you’ve chosen to receive it. You can also subscribe to the alert via RSS feed in Google Reader instead of email.
Caveat: Google Alerts is not guaranteed to be 100% foolproof or reliable. And since it only sends alerts when new pages enter into the top searches means it may not be an exhaustive result for every term. However, it’s a great place to start and helps you cover your bases!
What to Expect and How Long It Take
Updated October 30, 2018
On the fun scale, the mortgage underwriting approval process often feels like an exceptionally long dental appointment. You’ve dutifully gathered the mountain of documentation required to obtain a mortgage… or so you thought.
You’ll either hand them over to your loan officer or you’ll give them to an assistant or a processor. Either way, your documents will be reviewed for thoroughness, completeness, and accuracy, and almost everyone messes something up. They forget something or miss a signature. Your missing documents or signatures will be requested along with clarification on anything that’s not crystal clear about your docs.
And so it begins.
You’ll probably be quizzed right off the bat about any large deposits in your checking or saving accounts or how your 401k is vested, at least if you’re planning on making a down payment of less than 20 percent. This is standard so roll with it, but hustle with your answers and any additional documentation. It’s absolutely needed for the next step: underwriting.
Your Choice of a Lender
The next step in the much-ballyhooed “underwriting process” can vary a great deal depending on your loan officer and your choice of a lender. The mortgage lender and loan officer you choose, the type of loan you need, and the general level of detail you’ve put into gathering your documents will play a large part in determining your personal level of “underwriting discomfort”.
Your file will be passed on to a corporate mortgage processor in a centralized location that is typically nowhere near you, at least if you went with a big bank. These processors are typically overworked and underpaid so you can expect a more lengthy approval process. They try to maximize a number of loan files that everyone has to process/underwrite—it’s a quantity-over-quality approach.
Smaller lenders and independent mortgage brokers usually staff cohesive in-house teams. This results in more efficient operations and everyone is under one roof.
There are many good reasons to use a big bank and some of them are valid. They can generally afford to take more chances than the little guy, and that’s great if you find yourself in a gray zone for approval. They also typically offer a wider variety of niche mortgage products for things like renovation and construction financing. But you’ll have to give up a little something in the way of efficiency in exchange for these advantages.
The Effect of “Turn Time”
All mortgage lenders have a “turn time”, the time from submission to underwriter review and the lender’s decision. The turn time can be affected by a number of factors big and small. Internal policy on how many loans operations the staff carries at one time is often the biggest factor, but things as simple as weather conditions—think Rochester, NY in the winter—can throw lender turn times off quickly.
Ask your loan officer what she expects your turn time will be and consider that factor in your ultimate choice of a lender. Keep in mind that purchase turn times should always be less than refinance turn times. Home-buyers have hard deadlines they must meet so they get underwriting dibs.
Your purchase application should be underwritten within 72 hours of underwriting submission under normal circumstances and within one week after you provide your fully completed documentation to your loan officer.
Approved, Denied, or Suspended
The underwriter will typically issue one of three dispositions to your application: approved, denied, or suspended.
If it’s approved, underwriting will typically assign conditions you’ll have to meet for full approval. This might be clarification regarding a late payment, a large deposit, or a past life transgression. It could simply be a missed signature here or there.
If it’s suspended—which is not completely unusual—the issue of underwriting becomes more confused and needs clarification. These delays are typically employment- or income-related, but occasionally an asset verification question can also lead to a suspension. In this case, you’ll get two conditions: one to clear the suspense and the standard conditions needed for full approval.
Finally, you’ll want to find out exactly why if you’re denied. Not all loans that start as denials end up that way. Many times a denial just requires you to rethink your loan product or your down payment. You might have to clear up a mistake in your application or on your credit report.
Approved With Conditions
The status of the vast majority of loan applications is “approved with conditions”. This is referred to as “conditional approval”. The underwriter simply wants clarification and additional docs, mostly to protect himself and his employer. He wants the closed loan to be as sound and risk-free as possible.
Quite frequently, the additional items aren’t requested to convince the underwriter but rather to make sure the mortgage meets all the standards required by potential secondary investors who might end up buying the closed loan when everything is said and done.
Your Role in All This
Your primary job during the time your loan is in underwriting is to move quickly on document requests, questions, and anything else that’s asked of you. No matter how ridiculous you think the doc request might be, set that hoop aflame and jump through it as quickly as possible.
Do not take the inquisition personally. This is just underwriting does. Just handle the last few items and submit them so that you can hear the three best words in real estate—”clear to close”!
That’s it. You’re done. There will be only a few more routine hoops to jump through. Cut your down payment check, sign on the dotted line, and get ready to move.
Playing by the rules keeps the peace between buyers and real estate agents
BY ELIZABETH WEINTRAUB, Updated August 03, 2018
One of my buyers is a brilliant neurosurgeon, top of her class in medical school, but she doesn’t have a clue about etiquette rules with real estate agents. Nor does she understand why some listing agents have yelled at her when she calls them at random with questions. In her mind, she hasn’t done anything wrong. She is only trying to find out information about a house for sale.
Real estate agents love working with people, but there are always clients who may unintentionally cross the line. Here are a few simple protocols you can use while shopping for a home that will keep you out of hot water and on good terms with real estate agents. Especially your own agent.
Understand Agents Work on Commission
- Very few real estate agents work on salary and if they do, you probably don’t want them.
- Most real estate agents are paid a commission. If an agent does not close a transaction, she does not get paid. Agents are highly motivated to do a good job for you.
- Agents are not public servants and do not work for free. Do not ask an agent to work for you if you intend to cut the agent out of your deal.
Keep Appointments and Be on Time
- Be respectful, use common courtesy and don’t expect an agent to drop what she is doing to run out and show you a home. You are probably not that agent’s only prospect or client. And if you are, lord help you.
- Do not make an appointment with an agent and then forget to show up.
- If you are running late, call and let your agent know when you expect to arrive. Just show respect.
Choose a Real Estate Agent
- Decide whether you want to work without representation, dealing directly with listing agents, or if you want to hire your own agent.
- If you decide to hire your own agent, interview agents to find an agent with whom you are comfortable.
- If you are interviewing agents, let each agent know you are in the interview stage.
- Never, never, never interview two different agents from the same company. Trust me: Don’t do it.
Do Not Call the Listing Agent If You Are Working With a Buying Agent
- Listing agents work for the seller, not the buyer. If you hire the listing agent to represent you, that agent will now be working under dual agency. Conflicts of interest may occur.
- If a listing agent shows you the property, the listing agent will expect to represent you. Ethics prevent a listing agent from showing preferential treatment. If you ask a listing agent to do you a favor and try to discount the price, it’s comprising integrity and most won’t do it.
- Listing agents do not want to do the buying agent’s job. Let your buyer’s agent do her job.
Practice Open House Protocol
- Ask your agent if it’s considered proper for you to attend open houses In some areas, it’s frowned upon to go to open houses unescorted.
- Hand your agent’s business card to the agent hosting the open house. Sometimes this agent will be the listing agent, but often it is a buyer’s agent also looking for unrepresented buyers. Announcing you are represented protects you.
- Do not ask the open house host questions about the seller or the seller’s motivation. Let your agent ask those questions for you. Your agent will probably use a different approach that works.
Sign a Buyer’s Broker Agreement With a Buying Agent
- Expect to sign a buyer’s broker agreement. It creates a relationship between you and the agent and explains the agent’s duties to you, and vice versa.
- Ask about the difference between an Exclusive and Non-Exclusive Buyer’s Broker Agreement.
- If you’re not ready to sign with a buyer’s broker, do not ask that agent to show you homes. Otherwise, a procuring clause may pop up.
- Ask your agent if she will release you from the contract if you become dissatisfied. If she refuses, hire somebody else. Your agent should also be respectful of your goals.
Always Ask for and Sign an Agency Agreement
- By law, agents are required to give buyers an agency disclosure. This document varies across state lines.
- Signing an agency disclosure is your proof of receipt. It is solely a disclosure. It is not an agreement to agency. Read it.
- The best and most practiced type of agency is the single agency. This means you are represented by your own agent, who owes you a fiduciary.
Make Your Expectations Known
- If you expect your agent to pick you up at your front door and drive you home after showing homes, tell her. Many will provide that service. If not, they will ask you to meet at the office.
- Let your agent know how you want her to communicate with you and how often. Do you want phone calls, emails, text messages, IMs or all of the above?
- Set realistic goals and a time frame to find your home. Ask your agent how you can help by supplying feedback.
- If you are displeased, say so. Please. Agents want to make you happy. Don’t be afraid to speak up.
Do Not Sign Forms You Do Not Understand
- Do not feel silly for asking your agent to explain a form to you. It’s her job. Many forms are second nature to agents but not to you, so ask for explanations until you are satisfied you understand.
- Try not to sign forms titled “Consent to Represent More Than One Buyer.” This is never in your best interest. But sometimes you can’t help it because your agent could work for a large brokerage. That brokerage could represent more than one buyer, not your agent.
- Realize agents are not lawyers and cannot interpret law. Don’t ask agents to give a legal opinion, prefaced by the statement you are not asking for a legal opinion.
Be Ready to Buy
- If you aren’t ready to buy, you don’t need a real estate agent. You can go to open houses by yourself and call listing agents for showings—but be honest. Say you are “only shopping.” Look at homes online, but don’t waste an agent’s time if you aren’t ready to act.
- If possible, hire a babysitter to care for children who are too young to stay out all morning or afternoon touring homes.
- Bring your checkbook. You’ll need it to write an offer because an earnest money deposit may be required to accompany your purchase offer. And please, be pre-approved.