San Francisco isn't the most affordable area to live, is it?
Well, local residents, you have some choices. You can sell now and move away, or you can be better informed about what your home is worth so you can get the best price for your home when you do decide to move.
Movoto Real Estate has provided a very informative summary of what the Comparative Market Analysis process involves here. I can summarize the article, but the infographic is actually the best way to get a feel for how novice home owners can make best use of the information.
What is a Comparative Market Analysis?
A Comparative Market Analysis (CMA) is an evaluation of similar homes in an area–also known as comparables—to determine the value of a home. Real estate agents, buyers, and sellers perform a CMA to figure out a price range for a home, and then use it as a guide for putting the house on the market or for making an offer on a home.
The first step in doing a CMA is setting criteria. When creating a CMA you want to compare apples to apples. That’s an overused statement, but it’s important. If you do not compare similar homes, you might overestimate the value of your house. Worse, you might undervalue its worth.
Comparable Home Criteria
You should aim for at least three matching criteria, but the more the better. Standard criteria are:
- Location: The location of a home is more than its school district. Location includes things such as a view of the ocean compared to a view of a cell phone tower.
- Type: Compare your house to a house—not a condo. Compare your condo to a condo—not a house.
- Date of Sale: You’ll want your comparables to be recent. Try to stick within a three month period. If you have to, expand to six months. Remember, the further out you go the less useful the information.
- Size: Your comparable’s square footage should be within 15 % of your home. A house that is obviously much larger than your house will probably sell for more, all else equal. Conversely, a house that is much smaller will likely sell for less.
- Neighborhood & School District: If at all possible your comparable should be within the same neighborhood and school district. Some agents use use a five mile radius within a metro area and a 25 mile radius in rural areas. It’s actually a really good idea to drive by the home to get a first hand sense of the neighborhood.
- Number of Bedrooms & Baths: Try to compare homes with similar bedrooms and baths. There is some wiggle room here, but a home with three or even four more bedrooms than your house, isn’t a strong comparable.
- Age & Style: Try to compare homes with similar styles and from the same age group. As a guideline, the older your house is the larger range there is in comparables. A home that is 80 years old is likely similar to a home that is 90 years old.
- Condition of Home: If your house is a fixer-upper in need of a new roof and some yard work, it’s best not to compare it to the immaculately maintained house down the street.
- Lot Size and Usability: You don’t want to compare a significantly large lot to a modest lot.
Hopefully this information is useful, as families make more and more gutwrenching decisions about their living situation.