Pricing, Comps and Estimates

by Bethany Stephens

No two homes - even right next to each other - are the same. That's why you'll hear real estate professionals talk about "comps" or preparing a comparative market analysis. A CMA helps buyers and sellers determine the most appropriate list or offer price for a home or property.

What is a CMA?

It's a side-by-side comparison of homes for sale and those that have recently sold in the same neighborhood and price range. This information is sorted by data such as type of home, number of bedrooms, number of baths, lot size, neighborhood, property condition and features as well as many other factors. The goal is to show estimated market value based on past sales, pending sales and competitive properties currently on the market.

How is the CMA created?

Real estate agents generate CMAs using property information from the area's multiple listing service (MLS). MLS data is only available to licensed brokers, realtors and appraisers, all of whom pay annual dues in order to be allowed access to public and proprietary data, including taxes, past transactions and current listings. Agents generate CMAs for their clients - prospective buyers and sellers who have signed representation agreements to engage the agent to work on their behalf.

How accurate are CMAs?

A CMA is a real-time snapshot of the market, based on the most current data available... but it can instantly be rendered obsolete by a change in status of a current listing. The market is constantly changing - new listings, pending sales, closed sales, price reductions and expired listings as well as economic factors including interest rates, demand and inventory all lead to constant fluctuations in property values.

CMAs can also vary based on the knowledge and skill of the person generating the analysis as well as the data fields and property features considered.

What about Zillow Zestimates?

Zillow is primarily an advertising company, meaning they display properties for sale to attract a large consumer audience. Some of these people are active buyers, some are just casual browsers.

The MLS is the platform virtually all real estate agents in the market rely on when working with serious, active buyers. It reflects true data on actual transactions in that precise market.

On the other hand, Zillow aggregates data but may not reflect the actual condition of the house, recent improvements or deterioration and specific market conditions. It's a snapshot of trends in the overall region. Additionally, the Zillow error factor can swing by 10 - 15% plus or minus (meaning an overall range of 20 - 30%), which is pretty substantial.

Zillow is a useful tool and a good place to start for a general range as well as a sense of popular opinion, but there's no replacement for an experienced real estate professional's knowledge of real time market conditions... supported by actual local market data.