Only the data for sold properties are used in CMA calculations. Statistically reliable/representative averaging calculations (such as used in CMAs) should be based on at least five and preferably ten or more sold properties - unless the comparables (comps) are extremely close in all features to the subject property. The closer these comps are to the subject property in key features (such as location, square footage, bedrooms, baths, parking, lot size, year built, frontage, et cetera) and the more recently these comps sold, the more likely it is that a computed price based on them will reflect a realistic market price for the subject property.
Unless you have the same model house for comps, agents typically try to balance the range in comps so that some are a bit larger and more expensive and some are a bit smaller and less expensive than expected for the subject property. For square footage in homes, a range of plus or minus 10% compared to the subject property is generally considered comparable if all other significant factors are also comparable.
Also make adjustments to each comp for important differences from the subject property, if any, such as extra/fewer baths, water frontage, pool, upgrades, et cetera. Just being on the same street does not necessarily make properties “comparable” as far as price is determined (although it may be useful to include these for comparison to the neighbors). A key question to ask in selecting comparables for a CMA is what would buyers today consider most like the subject property?
Distressed property sales (foreclosures, short sales, and bank-owned sales) can present a special problem in determining true market value. In general, focus on the ratio of distressed to non-distressed sales in the neighborhood or local geographical area of the subject property. If the majority of recent sales are of distressed properties, then local prices probably are also distressed and distressed sales should be reflected in comps. However, if the majority of recent sales are traditional and the proportion of distressed sales is shrinking, you may decide to omit or only include a few distressed sales in your comps list.
Selecting comps is a judgment call and it is often difficult to find many truly similar properties. The CMA program can make some statistical adjustments, but the more nearly alike the other properties are physically to the subject property before statistical adjustments, and the more recently they sold, the more reliable and reasonable will be the estimated market value for the subject property.
Note that the average sale price on the Summary of Comparable Properties report page is the average of the unadjusted actual sale prices shown in the table. The average sale price on the Price Recommendation sheet is the adjusted sale price on which the recommended list price is based.
The CMA function automatically adjusts comparable residential listings for square footage differences from the subject property if square footage is provided. Not everyone enters additional adjustments to their comps. If no adjustments are calculated or entered, the average sale price will be the same on the Summary of Comparables and the Price Recommendation pages. If the actual selling prices have been adjusted (by you or the system), you may want to explain these adjustments on the Price Recommendation sheet. For CMAs created on the desktop version of CTI Navigator you also may want to add "Adjusted" to the line under Recommended List Price to read "Average Adjusted Sale Price".
See "CMA Tutorials for Desktop CTI Navigator" in the related articles below for a menu of animated slide show tutorials on how to create and edit CMAs in the desktop version of CTI Navigator.
For tutorials on using the CMA function in CTI Navigator Web II, click on Help in the Main menu-bar, then Tutorials, and select "Create and Manage CMA" and/or "Edit CMA Comparables."
For a tutorial on using the CMA function in CTI Navigator Web Silverlight, click on Help in the frame menu, then Tutorials, and select "Overview of Creating CMAs". You also can click on Tech Tips under Help and select "CMA and Report Management Tips."
See related articles:
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