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How should we use CMA (Comparative
Market Analysis’s) numbers generated
from MLS (Multi-Listing Services) to
derive our purchase or listing prices?
The CMA generated from MLS provides an
average Sold Price per Square foot for
selected sold properties and average
Listed Price per Square foot for
selected Active and Pending properties.
No absolutely not. The MLS generated CMA
does not account for many factors that
are important and should be included in
a real CMA such as: condition of the
house, upgrades, age, builders, size,
layouts and floor plan, location of the
house in neighborhood, and many more.
All these factors need to be adjusted
for all properties to match with the
subject property.
Condition of the Property: This
is obvious that some houses are kept
well and others not. e.g., the sold
price or listing price of a foreclosure
house with broken windows, doors, walls,
tiles, woods, appliances, torn carpets,
and etc cannot be used without many
adjustments to compare with the subject
property.
Upgrades: When was the last time
and what was the items were upgraded to
are important in calculation of CMA.
e.g., the upgrades in the kitchen such
as counter Granites, appliances (energy
Efficient), plumbing, etc. increase the
value of the house.
Age of the house: Depending on
the age of house and difference between
the age of the house and subject
property it may or may not be need to
adjustment. For example, if the subject
property was built in 1980 and the
comparable house was built in 1988, most
probably you don’t need adjustment.
Whereas, if your s subject property was
built in 2010 and you are comparing with
a brand new house built in 2012, you
need to make some adjustments.
Builder: Though, on the surface
and at first it doesn’t look important
and most of the time is ignored, but in
many cases the quality of workmanship
and materials used which derives the
built cost are very different from
builder to builder.
Size Square Footage: Buy size and
layout I mean you should not compare for
example the $price per square foot for a
condo with 600 Sq Ft with another condo
having 1300 Sq Ft. This needs
adjustment.
Assuming all other factors are the same;
the smaller size houses, condos, etc.
always have much more price/sq ft. than
larger size house. The one-story houses
always have more price/sq ft. than 2- or
3-story houses.
 The
shape and layouts: Are important too.
Assuming all other factors including
Square Footage are the same; the floor
plan, layouts and useable spaces are big
factors and needs to be adjusted. For
example:
 In
this example, both property have
70*30=210 Sq. Ft.
They are both 1-story, but it is obvious
property 1 with 70 sq, ft. frontage has
more value the second one with 30 sq.
ft. frontage.
70 sq ft.
30 sq
ft
   Example
2: 1-Story vs. 2-Story:
1-Story
2-Story
In this example, , both property
have 70*30=210 Sq. Ft. But it is
obvious that the 1-story property
has more value than the 2-story
property.
Example 3: In some cases, the shape of
the land and floor plan for two
different properties with the same area
square footage makes a different value.
e.g.,
  
They all have different values and
depending the usage, view, etc could be
higher or lower values.
What is the solution?
All these discrepancies and difference
should manually be adjusted for each
compared property to bring all
properties to the same level for
comparison purposes.
How to adjust values? The adjustment
values are different for each type of
property, location, price range, type of
addition or deletion, etc. Try to talk
to your local appraisal to get the
latest number in your area. You may
visit my website
www.TexasFiveStarRealty.com or click
here to see some suggested
adjustments value for properties in
north Texas.
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