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"Mimi Weisinger Presents..."

Mimi Weisinger
Broker/Salesperson in NJ
105 Union Avenue
Cresskill, NJ 07626
201-871-0800


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The Comparative Market Analysis


Whether you are a seller or a buyer you have probably heard about a "Comparative Market Analysis (CMA)."  It is the basic tool a real estate agent uses in estimating the probable market value of a property.  This estimate can be used by the seller in deciding what the asking price of his home might be, and it could help the buyer determine what amount of money she might offer the seller.  It is not an appraisal which can only be done by a licensed appraiser, but an assessment of the general market value of a subject property. Since no one can predict exactly what a particular property will sell for, market value is usually expressed as a range of value (usually a spread of 5%).

The properties selected for the report should be similar in style to the subject home and nearby.  If you need to know the market value of your ranch style home, the report should focus on other ranches.  If you are considering the purchase of a center hall colonial, the analysis would use the sales data of other two story homes.  The properties selected for this report are usually close in location or in the same neighborhood as the subject property.  If you live on the West side of a large town, for example, the properties used for comparison purposes ideally will all be located on the same side.  Occasionally, the subject property is unique, an antique house, for example, and the REALTOR(R) will need to compare the subject house to properties from a different town or neighborhood.

Also know as a "Competitive Market Analysis," this report will give compare a subject property to comparable homes which are

  • On the market
  • Under contract 
  • Sold recently (three to six months)

Ideally, the REALTOR(R) will choose three to five comparable properties in each category from the Multiple Listing Service data bank.  The most effective way to analyze the market value of the subject property is to list the amenities and features of the comparable property that are different from the subject property.  An approximate value is then assigned to each feature or amenity and an adjustment is made to the subject property. 

For example:

  • The subject property is an older, seven room, colonial which has three bedrooms, two baths and a one car garage.  It has a full, finished basement. It also has a first floor family room and the kitchen and baths have been updated within the past two years. 

The REALTOR(R) would ideally compare it to other seven room colonials in similar condition. 

However, the only properties currently on the market in the neighborhood are:

  • A six room colonial with three bedrooms, a bath and a half, a one car garage, recreation room in the finished basement, and no updating
  • An eight room colonial with three bedrooms, two and a half baths, first floor family room, two car garage, unfinished basement and not updated
  • An eight room colonial with four bedrooms, two baths, first floor family room, finished basement, two car garage and updated kitchen and baths 
  • In all other respects (location, property size, age of systems, central air conditioning, etc.) the properties are very similar.

The agent should compare the properties, item by item, to the subject property, noting whether the differences add to or subtract from the value of the subject property:

Feature

Subject Property

Comparable #1

Comparable #2

Comparable #3

Closed (Sold) Price

 

$500,000

$525,000

$550,000

Bedrooms

Three

Same

No adjustment

Same

No adjustment

Four

- adjustment

Baths

Two full

One and a half

+ adjustment

Two and a half

- adjustment

Same as subject

No adjustment

Family Room

On first floor

None

+ adjustment

 Same  

No adjustment

Same

No adjustment

Basement

Finished

Finished

No adjustment

Unfinished

+ adjustment

Finished

No adjustment

Kitchen

Updated

Not updated

+ adjustment

Not updated

+ adjustment

Updated

No adjustment

Baths

Updated

Not updated

+ adjustment

Not updated

+ adjustment

Updated

No adjustment

Garage

One car

Same

No adjustment

Two car

- adjustment

Two car

- adjustment

The written Comparable Market Analysis should include some sort of graph or chart summarizing the differences between the selected properties currently on the market, properties under contract and properties recently sold with the subject property. 

The REALTOR(R) would make the adjustments as indicated, weighing the age and quality of any improvements, the desirability of improvements (a first floor family room is generally more desirable than a finished basement room), and the general size of the rooms. 

Additionally, the real estate market is based upon the basic law of supply and demand. Are there more buyers or sellers in the market?  How long does it take to sell a fairly priced property?  Look at the trends.  Is it taking longer to sell a property today than it took three months ago?

When a seller is selecting a REALTOR(R) to market a property, it is wise to get written CMAs from three agents who know and work the local market.  Also ask each agent to provide you with a written Marketing Plan as to how each agent would market your property.  Compare the plans and the marketing investment (fee) you will have to make for each plan.

As a seller, don't choose an agent just because he or she came in with the highest estimate of market value for your property. Choose an agent based upon the marketing plan that meets your individual needs and feeling of rapport with the agent.  Set the price based upon the information you have been given.  Before  you list your property, you should have a clear idea of your property's range of value based upon the written CMAs.

 

 
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