Understanding and adjusting the Comparative Market Analysis

With 2019 ahead of us, both buyers and sellers are evaluating their upcoming positions in the real estate market. Buyers will be looking for the best price and sellers will be looking to reap the highest dollar amount possible in the sale of their property. Both sides will look at comparable sales from various web sites and from the Northern Arizona Multiple Listing Service (MLS) to determine the best course forward whether buying or selling a particular property.

If you are a buyer, knowing the fair market value of a property that you are considering buying gives you confidence in the negotiation process and may prevent you from overpaying for a home.

But what is the fair market value of a house and how is it determined? Simply put it is the highest price that a knowledgeable buyer, who is under no pressure to buy, will pay. This is, at best an educated guess and is most easily determined by comparing the home you are selling or buying to other similar homes that have sold recently in the same neighborhood. This comparison is called a CMA or Comparative Market Analysis. It compares a number of variables between properties, such as the number of bedrooms, bathrooms, square footage, age, lot size and special amenities.

However even with these figures, setting a fair market value is an art and not a science. You can use all the numbers you like, but each home is a unique property at that moment and time. There are other variables that a buyer might consider when making a purchase. Is a view of the San Francisco Peaks very important and if so, how much are you willing to spend to look at the mountain from your front window? Does train noise turn you off and if so, are you willing to live with it if a seller is willing to discount the price of their home? Is the lifestyle here something you must have and are you willing to spend more for a home so that you can enjoy what Flagstaff has to offer?

Just as each property is unique, so are buyers and sellers. Emotions and desire sometimes overrule the numbers of a comparative market analysis and play a part in the negotiation process even when the fair market value is known by both parties. To some buyers and sellers, home equity may not just be dollars, it may include views, location, and lifestyle.

The CMA is a starting point for negotiations, but adjusting it because of other factors may determine the final outcome of the sale.



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