A comparative market analysis determines the sale and purchase price of a property by evaluating sales and listing prices of similar homes. Information is obtained from public records and the MLS, and a minimum of three comparable properties are needed. It is recommended to use six properties and comparable homes that have sold within the past three to six months. It is also useful for refinancing or taking out a second mortgage.
A comparative market analysis is a tool in real estate sales and purchases to determine the sale and purchase price. A comparable market analysis evaluates the sales and listing prices of homes similar to the property in question, which is the home that is on the market or about to go on the market, to determine its approximate value.
The information needed to create a comparative market analysis can usually be obtained from the public records of the county where the property is located. Another source of information needed to perform a comparative market analysis is information from the Multiple Listing System (MLS), which is the computerized listing system that real estate agents use to list and search properties for clients.
When conducting a comparative market analysis, it is typical to obtain a minimum of three comparable properties. A comparable property is the same type of property, such as a single-family home, condominium or duplex. A comparable property also has the same or similar square footage as the subject property. Property amenities should also be similar and a true comparable property is within a mile of the property in question.
When performing a comparative market analysis, the home seller uses the collected information to determine the price range that they should list their properties for sale. A buyer uses a comparative market analysis to determine a fair price for the purchase of a property. Property appraisers use tools similar to a comparative market analysis to also determine a property’s market value.
It is generally advised by real estate experts, appraisers and mortgage lenders that when collecting the information, benchmark the market to use six properties in total. Three of the properties are currently expected to be on the market but still meet all the other criteria that make them comparable. It is also recommended to use comparable homes that have sold within the past three to six months.
In a situation where a homeowner is considering refinancing a mortgage or taking out a second mortgage, a comparative market analysis can be done to see if the home assesses a high enough value to refinance the debt at the home’s current balance. The homeowner can also use a comparative market analysis to see if the home has acquired enough equity to settle a loan or take some extra money out of the home.
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