The Step-by-Step Guide to the CMA. Comparative Market Analysis Training

daily sales tip for real estate agents listing presentation prospecting Sep 06, 2021
 

The Step-by-Step Guide to the CMA. Comparative Market Analysis Training by a Top Producing Real Estate

Below are the steps I follow for every comparative market analysis I carry out in my own business.

Before you carry out a CMA on a potential seller’s property there are certain pieces of base information you need, gathering this information correctly and diligently will ensure you build your CMA off a solid foundation.

Information you should have on the seller’s property when preparing to give a pre-listing + listing presentation on

  1. Full property address
  2. Property Land size 
  3. Property Build Size 
  4. Zoning allotment of the land
  5. Property particulars - example 3-bedroom, 2-bathroom, double garage 
  6. Year of build. 
  7. Any renovations carried out on the property since the current owners took ownership of the property.
  8. Does the property have all its planning permissions and permits in place 

You will obtain this information from 

  1. The property software used within your business. 
  2. Through the preliminary questions which you asked the potential seller. 

In order to ensure the CMA, you carry out and then the pre-listing + listing presentation you give to the potential seller, supports you in WINNING the Listing

  • At the right sales price
  •  With appropriate and agreeable terms to the listing agreed; including the correct commission structure to support you to build a financially abundant and successful life which a career in real estate offers. 

Then it’s important that you gather further valuable information BEFORE you sit down and start working on your CMA. 

Once you’ve finished your conversation with the potential seller, as soon as practical - keeping in mind; you only have 24 hours to turn around an informed CMA and create your pre-listing presentation - so when I say as soon as practical - what I’m really saying is within 30 minutes of talking with your seller. 

Never forget - to be successful in real estate

we need to list the right stock for your marketplace.

- your potential sellers,

- carrying out effective CMA’s

and giving listing presentations

take priority over EVERYTHING else!

So, if you want to create a CMA, pre-listing, + listing presentation to the standard of that of a top producing real estate agent - then, before you do any work… you need to take the following action: 

Go hop into your car, drive by and go physically LOOK at the exterior of your potential sellers’ property!

Here is what you’re going to look at:

 How does the property & its gardens present on the exterior?

How do the neighbouring properties + their gardens present?

Do the neighbour’s properties positively or negatively affect your potential listing?

How does the overall street present?

What is your potential listings proximity to the following:

              Local schools, junior + senior

              Main road infrastructure

              Public Transport

              Local Shopping complexes 

              Local Parks, gyms, and public amenities 

              Main areas of employment

              Cities + Airports

              Beaches + major tourist/lifestyle attractions 

When carrying out a comparative market analysis, it’s crucial we take an in-depth look at our local property marketplace and the comparable sales evidence for the following reasons. 

  • To gain a good understanding of the activity in the local property marketplace.
  • As an assessment of what motivates the buying market to commit to a purchase of a property.
  • To ascertain where the potential seller’s property sits in relation to the current property marketplace activity and the buying market's interests. 
  • To assess, when bringing the potential sellers property to market, what would be the best-suggested price listing guide, what is the guide on the expected days-on-market-time-frame; and which properties are in direct competition with the potential seller's property. 

In simple terms, here is what we really want to know:

  • Is the market moving?
  • What are people buying?
  • How much are they paying for it?
  • How long are they taking to purchase the property?
  • What looks to be the best price guide for our potential listing, so it falls in line with the market activity and its buying groups?
  • What is our potential listings’ current competition in the marketplace?

In simple terms, this information will support us in successfully listing only properties which are best suited to our marketplace and its buying markets. This diligent and professional approach to our listing process, will ensure our properties sell successfully and in the appropriate time frame; not only supporting our earning potential in the role of real estate sales; it will also support us in building a reputation of being an active real estate agent in the marketplace and then onto a leading local real estate agent. 

 

The information we gather through our comparative market analysis research will also help us to lead, guide, inform and educate our potential sellers to commit to listing their property for sale at the appropriate price point.  

So now that we understand the WHY, let's get into the how. 

First, we will consider the entire marketplace for the last 12 months back.

 

Why should we do this?

  1. It will show us all the different types of properties which are selling in our marketplace. This will give us a broad view of our marketplace and its different buying markets.
  2. Most likely; at a glance - a trend of which properties most commonly sell in that marketplace will become obvious. 
  3. We will note the total number of properties that have successfully sold in the last 12 months. Being aware of this figure means we will have a clear understanding of what % of the marketplace is turning over every year. So, in simple terms, we are obtaining some facts and figures around how active and lucrative a particular property marketplace is: 

We pull the 12-month report from our property software. The report should include the following detail. 

    1. Property Address.
    2. Image of property exterior.
    3. Property particulars (for example 3 bed x 2 bath x 2 garage)
    4. Build + land size if available.
    5. Price achieved. 
    6. Date of sale.
    7. Number of days on market. 

We pull this report to show every property that sold in our entire marketplace for the 12 months back. 

It’s important to make note of shifting markets here and how to gauge and understand the effects of a shifting market on your local property marketplace.

Property markets will shift for different reasons, such as, economic shifts, shifts in political power, improvement of infrastructure, economic and national crisis, unforeseen global events, for example, COVID.

In fact, it is better considered that really property markets are never too far from one shift or another. And that these shifts are often the times when real estate agents will find themselves busiest. So, it is crucial for any local real estate agent to learn how to communicate with their potential sellers and buyers in shifting markets. More on how to manage this communication later in the Win the Listing eCourse. For now, let’s revert to how to gauge and understand the effects of a shifting market on your local property marketplace.

When a property market is in flux; then you will also need to pull the exact same report as above-mentioned except only for a 6-month period and sometimes, if there is a lot of upheaval in the local marketplace - then pull it again for a 3-month period. 

You will require the exact same information.

Except for this time, you will be looking in detail at the below considerations: 

  1. Has there been a lesser or higher number of sales in this 6month or 3-month period in comparison to the previous?
  2. Are the average prices on the stock - higher or lower?
  3. Are the days on market - longer or shorter?
  4. Is the trend changing in the type of property that the buying market is actively purchasing?

At this stage of preparing the comparative market analysis simply jot this information down 

In the next stage of the comparative market analysis, we want to start funneling this information down into groups:

  • Properties that are similar to the property which you are preparing the CMA (comparative market analysis) on 
  • Properties that achieved a successful sale in the price bracket above, from where is likely your potential sellers’ property will sell.
  • If it happens to be the case that a different property type is more in demand in your marketplace - then we would gather the data on that group of properties. For example, if your potential seller’s property is a single storey villa, yet it seemed to be double-storey townhouse properties that were more in demand in that marketplace / or vice a versa; then, we would need an overview of this property grouping.

The reason this information is of interest to us, is we are attempting to define the following:

  • The likely price bracket the potential seller's property will successfully sell in
  • At which point the bracket that your potential seller’s property becomes too expensive and the buying market shift their purchasing power to a more superior style property
  • Also, which other factors, using the example of the villa’s and townhouses above; could affect the performance of your potential sellers’ property on the market.

Next, we will look at each group and obtain the following information:

Initial considerations will be as follows: 

- Street address. 

- Initial exterior presentation - based on the single image provided on the report.

- Price achieved.

- The number of days on market.

What will become obvious to you as you consider this information is:

  • A trend on the prices being achieved.
  • A trend on the expected days on market.
  • A similarity on the presentation of the property in these trends. 

Next, we will dive deeper into these trends. 

Remember the ‘WHY’ we are putting the work in at this stage: 

Being fully informed on the local marketplace allows us to speak about the marketplace with the confidence and knowledge of the local property market expert. We can speak about it in a manner that is expected of an active and then on to leading local real estate agent.

However, even more, important again, is having this knowledge will better help us lead and guide our potential seller as to where the property would need to be placed for it to successfully sell, in an appropriate timeframe.

This same information will help us neutralize any objections or concerns the potential seller may have about the suggested price and marketing strategy.

This same information will help us support our buyers to move forward with confidence with an offer on the property. 

Let’s move on to how we dive deeper into understanding how properties that are similar to our potential sellers performed in the marketplace over the last 12-month period.

So, from the work we have just completed; we now have a group of properties, which we feel are similar to the property of our potential seller. In order to ascertain the most effective price-marketing for our potential sellers’ property, we need to have a more in-depth look at the successful sales of similar style properties.

To do this, we follow the below-detailed process:

  • We go to google, or your preferred search engine and we type. 

‘’FOR SALE and the property address of the comparable property’’

This will bring us to the online advertising for that particular property. 

We are looking for the following:

  • How the property presents online. 
    • Look through all the photos.
    • Read the property marketing text. 
  • Look at who is selling the property and consider their presence and selling reputation in the marketplace. 
    • Are they one of the top agents? 
    • Are they newer or older to the industry? 
    • Do you know them? 
    • What do you know about their reputation?
  • Look on the map.
    • How close in proximity is this property to your potential listing. 
    • How close in proximity is this property to:
  • Local schools, junior + senior
  • Main road infrastructure
  • Public Transport
  • Local Shopping complexes 
  • Local Parks, gyms, and public amenities 
  • Main areas of employment
  • Cities + Airports
  • Beaches + major tourist/lifestyle attractions 

 

  • Jot down which properties seem most comparable to your potential sellers’ property. 
  • Note each of these addresses; and copy+paste into your worksheet or a word document; the link to the online marketing for these properties. 
  • By the end of a good CMA, one that is to the standard of a top selling and listing agent; you should have the links to the online advertising for a minimum of 5 properties and a maxim of 10-12 properties. 

Next, group 2 ; we want to consider further the properties which successfully sold in the price bracket above.

Why would we do this?

Because inevitably every seller wants more money than their property is worth! 

Why is this? 

Often its miseducation 

Let me explain further, when sellers are considering selling their property:

  • They will watch what is happening in the local property marketplace. 
  • They will watch what properties have been listed for sale and at what price point. 
  • They will also watch which agents are putting these properties to market. 

 

As we know, agents and homeowners often go to market with aspirational ‘for-sale’ prices.

When we agents research in our property software systems - often, we will find that the property has in fact sold for less than the advertised price. 

The catch 22 is often our potential sellers do not have the same access to the information we have. 

 

Often, they are expecting you to give a listing presentation that details their property being best price marketed at a figure higher than what the research is showing the buying market is paying for properties.  

In my experience, the best way to soften this blow for the potential seller is to take the time to inform them, let them see the facts and figures, and help them come to the correct pricing conclusion themselves.

I make it my business to also research the successfully sold properties in the price bracket above is for the following reasons:

  • To inform myself on why these properties achieving more on the marketplace.
  • What do these properties have that the buying market is seeing as more valuable?

I want this information so I can also detail this to my potential seller to help them draw a comparison between their property and the property which successfully sold in the higher price point bracket.

              Again, we will carry out the same research technique:

              Google, ‘’FOR SALE and the property address property’’

 

We are looking for the same information as to when we carried out this search on the comparable properties except for this time we are trying to ascertain as to WHY or WHERE the buying market has seen the extra value offer with this particular property purchase.

Pick the best 5 examples of properties that achieved a sale price in the price bracket above that which your potential sellers’ property is likely to achieve.

This price bracket will be dependent on your marketplace - it could be $20K, $50K, $100K - it is whatever amount of money - your buying market expects more for their money. 

Again, jot down the address and copy and paste into your worksheet or a word document; the link to the online marketing for these particular 5 properties.

 

Next, group 3; We will look at the current listings on the marketplace.  

It’s important to note, when you are carrying out a CMA on a potential listing; you NEVER consider the ‘for -sale’ prices advertised as ‘market evidence’. 

As mentioned earlier, ‘for-sale’ prices are often simply an aspirational price-point.

However, inevitably there will be properties that are very comparable to the potential seller’s property in finish and location.

We want to examine these properties from a double-sided perspective:

  • Which current listings are in direct competition to our potential sellers’ property and how are they positioned to meet the market?
  • Which properties are in direct competition to our potential sellers, which are incorrectly placed on the market, which we can leverage off?  

Again, we will carry out the internet search for this property grouping.

We consider all the same facts as the other internet searches carried out for this CMA.

In the case of competitive stock - we also pay close attention to the properties which are priced above what you are seeing is market value 

Specifically, we are note here.

  • The advertised price
  • How long that particular property has been on the market.
  • If this particular property has had a change in agents. 

And again, we collect roughly 3 - 5 links of the current listings which will help us best inform our potential seller as to what is currently happening in the local marketplace with the current listings and their price points. 

The final 2 pieces of information which need to be researched to bring the comparable market analysis to the standard of that of a top listing and selling agent; a CMA which will support the real estate agent to speak with informed confidence on the local property marketplace; which in turn will best guide both the potential sellers and the buyers;

Are as follows:

  • Group 4; Properties that are currently under-contract.
  • Group 5; properties that have been withdrawn from the market.

Let’s look at each of these research points:

Firstly, the properties which are under contract.

Especially in shifting markets, this information can really inform us as to where the buying market is at, right here, right now!

The only way to get this information is to ask the agent involved in that particular property deal.

Most well-mannered and professional agents will happily answer some questions for you around pricing; I will note here, if the deal is not unconditional it is likely the agent will not be able to tell you the exact price they achieved, however, they often will allude to it if you ask them to

The conversation would go something like this:

You: Hi there, I see you have ‘property address’ under-contract, congratulations!  My name is X and I’m a real estate agent/realtor with X. I am currently putting together a CMA for a client of mine (no need to give any further information regarding the property you are working on) I wonder would you mind sharing how ‘property address’ performed for you?

 

The agent will most likely respond with something along the following lines:

  1. Well, it's not quite unconditional, so I’m afraid I cannot tell you the accepted price yet.
  2. Sure, we got ‘this or that’ and the new owners take possession on ‘this date’.
  3. I’m sorry I don't give out that information (and other different forms of bad sportsmanship in the game of sales) 

 

Your response to each of the above responses would go something like this:

Response to 1: Oh, that's totally understandable; would you mind sharing though is the accepted offer in and around the asking price, or a little higher or maybe lower?

              *Most professional and well-mannered agents will give you a clue here. 

Response to 2: Congratulate the agent and thank them for sharing. 

Response to 3; the same as the response to 1; take whatever information Mr Important gives you here. Its better we have good manners and try to obtain this information. We can always roll our eyes and stick out our tongue when we hang up the phone from Mr important :)

Jot this information down on our worksheet. 

Finally - we want to have a real good look at what did not sell or what was withdrawn from the marketplace, which is comparable to your potential sellers’ property, in the last 12 months. 

This information will speak quite plainly to the unrealistic expectations of a potential seller and the expected outcome of these unrealistic expectations. 

In simple terms - simply pull the same report for 12 months back, except in this case we set the report filters for withdrawn properties only. 

We want to know how many properties have been withdrawn in the last 12 months, paying close attention to the ones which are most comparable to our potential sellers’ property. 

Again, we will do the google search and we will take an in-depth look at the most comparable properties; we will jot-down these addresses and their property links on our worksheet or word document. 

 

By the end of this research, the real estate agent will have a fully informed understanding of the local marketplace, the buying activity within the marketplace, and a suggested price-marketing point for the potential seller’s property.

The real estate agent will understand how best the potential seller’s property should be presented to the market for sale and an expected timeframe for the property to go successfully under-contract.