2:23 Minute Read.
Every word, action and document we present to a client either draws them closer towards choosing us as their real estate agent or pushes them farther away. That is particularly true of CMAs. Here’s an easy guide to building a great CMA.
A well-made CMA serves 3 functions:
1. Wows your clients with your professional approach and knowledge.
2. Dissuades your clients of incorrect market information. 3. Presents your clients with a reasonable range of value.
If your CMA doesn’t accomplish these 3 goals, its time to re-work it.
“More paperwork will not impress your client. Good data will”
A good CMA comes in two sections. The first part is based on the property’s history and specific neighborhood. Think of it as the seller’s viewpoint of the property. It includes an appreciation forecaster, SEV valuation, algorithm review and a FlexMLS map and list of all recent activity in the area.
1) Using tax data and home appreciation indexes (which can be found online), calculate an appreciated value based on the historical purchase price and sale date. Honestly, that sounds difficult but it’s not. Our company provides an appreciation forecaster as part of our Estimated Net Sheet. Input a few numbers and out pops a sheet identifying the house’s value every year since it was purchased. Clients enjoy seeing the historical track of values.
2) Most home owners believe their home’s value is 2x it’s SEV. While not convinced using the SEV is a good way to determine value, I’ll use it as another data point to consider.
3) And then there is Zillow & Trulia. To learn how I use these algorithms, read it HERE and HERE. Home sellers are very familiar with these sites so it only makes sense to add it to your package of information. It’s smart to present two numbers: Zillow’s published value and the regional adjustment which in my opinion is 7.852% less.
4) Using the FlexMLS map search, draw a tight parameter around the property’s neighborhood. Use the One-Line CMA page to identify local activity. It will give you high, low and average values of active, pending and sold homes.
Using these 4 pieces of information, you can create a range of values. It’s great when all 4 numbers fall close to each other. The narrower the range the better. The best CMAs can predict a home’s selling price within a few thousand dollars.
But you’re not done yet. There is a second part to creating a rock solid CMA. Home sellers only look at one home – theirs. Buyers on the other hand want to look at every property available. Think of this as presenting the buyer’s viewpoint. When buyers call a Realtor, they usually identify the school district or area of town they are interested in and the number of bedrooms, baths and a few important amenities they want. Home sellers need to be aware of all the competition that buyers are seeing and comparing their house to. What price are the sellers considering to offer their house for sale? Does it fit within an average range or is it higher or lower? Is it far above the average price of competing homes for sale in the broader area? How many competing homes are available? Knowing this information can help sellers position their property more competitively.
Some property valuations are easy. If you are comparing homes in an area of like-kind houses, you can bet it’s pretty easy to predict your client’s house value. However, many homes are not that easy. You may need to slice information several ways. Is there extra acreage? Is there water frontage? By calculating each of those amenities independently, its easier to construct a value range based on each element.
Two final thoughts:
Sure, you can use the CMA generator found at FlexMLS. It will produce dozens of pages of colorful information. However, too many agents do a poor job understanding and communicating the data. Clients are left feeling the agent really doesn’t really understand the nuances of selling their home. Using more paper will not wow them. Good data will.
And really, isn’t it the client who determines the offer price for a property? They have heard your best professional advice. Sometimes, even the most reasoned guidance is ignored. If they want to offer their home at a price that is higher than your recommended range, let them. But there is one caveat – It’s OK to list at a higher price so long as they are willing to listen to showing feedback, heed what the market is saying, and be willing to adjust their price accordingly. And sometimes the loudest market feedback occurs when no one shows up. Then, it’s time to move clients toward reality.
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