What are the common pitfalls and mistakes to avoid when using a CMA?

2 Compare apples to apples

One of the most important aspects of reading a CMA is to make sure that the comparable properties are truly comparable to the subject property. This means that they should have similar characteristics, such as age, style, square footage, number of bedrooms and bathrooms, lot size, and location. For example, you cannot compare a condo to a single-family home, or a waterfront property to a landlocked one. You should also look at the dates of the sales, as the market can change rapidly over time. Ideally, the comparable properties should have sold within the last three months, or even less if the market is volatile.

3 Adjust for differences

Another key aspect of reading a CMA is to understand how the adjustments are made and what they mean for the value of the subject property. The adjustments are usually based on a percentage or a dollar amount per unit of difference. For example, if a comparable property has a pool and the subject property does not, the CMA might deduct 5% or $10,000 from the value of the subject property. Similarly, if a comparable property has a smaller lot size than the subject property, the CMA might add 10% or $20,000 to the value of the subject property. The adjustments should reflect the preferences and expectations of the buyers in the local market. However, they are not exact and can vary depending on the source and method of the CMA.

4 Look at the big picture

The final aspect of reading a CMA is to look at the big picture and not get too hung up on the details. A CMA is not an appraisal, and it does not guarantee that the subject property will sell or appraise for the suggested price. It is only a guide that helps you to understand the current market trends and the range of values for similar properties. You should also consider other factors that can affect the value of the subject property, such as its condition, curb appeal, motivation of the seller, demand and supply, and financing options. Ultimately, the value of the property is determined by what a willing buyer and a willing seller agree on.