My New Outside Blog: Piecing a CMA Together

Piecing a CMA Together

 

Keep it simple .. always a great rule of thumb as you are explaining parts of the process of real estate to your clients.  The explanation on how you prepared your CMA can be challenging, especially if you do not have a seasoned buyer/seller.  To avoid the blank stares and engage them into a visual understanding, I came up with an analogy that I use when I teach CMA classes as well as discuss with clients.

  • Picture that all aspects of your home are like a Jigsaw PuzzleEach piece represents an intricate part/amenity regarding your property and it is the component that the buyer recognizes as adding value.
  • You begin with the border of the puzzle which represents the site and location of the property.  A buyer will recognize the site size, view premiums/negatives, location.
  • As we layer in the pieces, each piece represents aspects of the home like - living area, architectural style, number of bathrooms, type of counter tops and kitchen finishes, number of garage/parking space, etc.
  • As the picture is pieced in we begin to see the image unfold.  The buyer will recognize condition, discriminate other features of the home. 
  • The more we complete the picture, the buyer sees quality finishes, designer tones, and what they feel it should be worth in comparison to other homes they have viewed.  How the home stacks up.
  • With the completion of the puzzle you have the total picture and value estimate of the property.  Each piece represents value (adjustments) that are points of difference that this property has to offer.

Value for varied amenities/difference of comparison to the sold properties (comparables) and active listings (competitive listings) are determined by what a buyer would pay for this item.  Not what the seller paid or cost.  It is the contributory value. 

One key componet for the Jigsaw Puzzle - the buyer is the one who puts it together.  The buyers determine what a home is worth.  We must look at your home with adjustments and proper comparison to the sold sales and active listings in order for us to better understand what the buyers have been telling us about your neighborhood.  Several homes need to be included in the analysis to give us a range of understanding.  Active listings sets the bar not to exceed in indicated price level.

Piecing it together to give a great picture to understand how you CMA will help price position the home or assist in a purchase decision.

Comment balloon 6 commentsConnie Goodrich • March 07 2011 06:56PM

Comments

Connie,

Thanks for your recent comments on our blog.  Appreciate your views about the CMA.  And what we've noticed besides the matrix comparisons is that strategy is gaining momentum on how properties are priced and sold, of course, depending on appraisal values, etc... g

Posted by Cherise Selley, Colorado Springs Realtor (Selley Group Real Estate, LLC) over 8 years ago

Connie GREAT visual and the adjustments on a CMA are the tricky part. No that you can't do apples to apples only comparison based on just $ per sqft. Appraisers tell us that all the time.

Posted by Gary Woltal, Assoc. Broker Realtor SFR Dallas Ft. Worth (Keller Williams Realty) over 8 years ago

Hi Connie:

This is a fantastic analogy.

CMA are like putting the pieces of a puzzle together...very true!

Posted by Toula Rosebrock, Broker/Sales Associate, Realtor, Lacey Township, (Diane Turton, Realtors, Forked River, NJ) over 8 years ago

Sometimes in an analysis of determining a value or price, sufficient data is not present for all the pieces of the puzzel.  Then you have to make a judgement based on experience about what you can see, kind of like trying to tell what a 500 piece puzzel looks like if you only had 450 pieces. That's when it can get tricky.

Posted by Craig Chapman, The Value Guy (Call Realty / Access Appraisals) over 8 years ago

Connie - While I'm not a Realtor creating CMA's, I do like the analogy of the jigsaw puzzle for explaining and illustrating a complex and detailed process.  I'll have to remember this in my next presentation of the loan process.  :)

Posted by Donne Knudsen, CalState Realty Services (Los Angeles & Ventura Counties in CA) over 8 years ago

Cherise - appraisals, that is a totally different can of worms.  Actually as an appraiser, in my analysis of a home I do approach it like I would on an appraisal.  I always appreciate your comments and visit to my post!

Gary - appraisers tune out if you say the price per square foot as that is not how they approach a home value.  You do miss many aspect unless you individualize the home in a valuation.  Thanks for your visit!

Toula - glad you liked it!  I tried to come up with a way to help clients and students to visualize what they are seeing from an analysis.

Craig- excellent point.  On highly specialized properties a valuation is very hard and hence you will know of an obstacle for an appraiser.  You know you must have a strong buyer for the home because the appraisal will not be easy and may flag underwriter concerns.  Thanks for your visit!

Donne - glad you found a tidbit to use in your business.  As always, appreciate you!

Thanks to all for your continued visits and comments that I do value and look forward to receiving!

 

Posted by Connie Goodrich, CRS ABR (McKinney Realtor)Texas (Keller Williams Realty) over 8 years ago

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