When working with real estate landlords, you must prepare a Comparative Market Analysis (CMA) before listing the property. Here’s why it’s important and how to prepare an accurate and informative CMA.
What Is a CMA?
A CMA is an estimate of a real estate property’s final leasing price. It includes much information that narrows down the range of that price. It’s an objective opinion by a real estate professional based on data about the property, its community, and other comparable, nearby homes.
Why the CMA Is So Crucial
The CMA is vital to everyone involved in a rental transaction. As a real estate agent, you need the valuation of the property to contribute valuable services like protecting your client and negotiating on their behalf. You also need the valuation to be accurate so that the landlord and tenant will both be happy with your service and recommend you to their friends, family, and associates.
What’s more, the landlord needs the CMA for many reasons. It is critical to get a realistic estimate of the income they can make from the property. In addition, the CMA can help them set a price that will allow the property to lease as quickly as possible without accepting less than it’s worth.
Finally, tenants sometimes use CMAs, too. They can use it to help them determine how much they should offer or agree to when they lease the home. They need to offer enough that they don’t miss out on renting a home they want. And they also need to avoid paying too high a price. The CMA helps them find the right offer price.
Preparing a CMA
Preparing a CMA takes time, but it also takes skills and knowledge. You likely learned this fact in real estate school. However, you may need a refresher and practical experience in creating a CMA. It starts with excellent real estate skills and an understanding of valuation. You can take the real estate agent training course called Roadmap to Success: Landlords to learn more.
Sharpen Your Real Estate Skills
Before preparing for your first CMA, your real estate skills must be honed and ready. You must develop your knowledge about valuation. Then, you need skills, including how to use real estate tools to find relevant information and craft the CMA.
Finally, you need to know the specific property and what surrounds it. Only then will you see the information the landlord, tenant, and you as the realtor need. When you gain this knowledge, you are ready to delve into what it means to create a valuation.
Understand Valuation Terms
In nearly any subject, learning the vocabulary prepares you to understand the rest. Here are some words and phrases you can learn to set yourself up for CMA success.
· Comparable – A recently rented property that is like the property the landlord is leasing.
· Competition – Another similar property is currently listed but hasn’t been rented yet.
· Adjustment – How much you add or subtract from the comparable’s rental price to get the property’s income potential.
· Price – The amount the landlord decides to market the home for, but not necessarily the market value.
· Market Value – The price the home would ordinarily rent for in a competitive market. Also called the fair market value or fair market price.
Once you understand the terms of valuing a property, you can move on to the next phase – preparing the CMA.
Creating the CMA, Part by Part
Each CMA you prepare is your own creation. CMAs can be of different lengths, styles, or designs. However, there are several things you always need to include:
· Market information
· Description of the neighborhood
· Comparables and information about them, including their pricing
· Analysis of each comparable, including any adjustments you make
· Commentary to clarify how you arrived at your figures
· A price range based on your calculations.
CMAs can also include charts, photos, or other information if it is relevant to the pricing. Remember that the most crucial thing to get right is the price range. However, to come to this range’s correct estimate, you must complete all the earlier steps carefully.
Tips for Preparing and Presenting the CMA
Lastly, here are a few tips to help you prepare and present the CMA.
· Make the CMA as brief and concise as possible without leaving out anything important.
· Don’t forget to include supporting information.
· Create a favorable impression with a professional-looking presentation folder.
· Be sure you have estimated a range of values rather than an exact price.
· Bring along an extra copy. Then, add notes while you present the CMA to the landlord.
Once the CMA is complete, you must present it to the landlord. Be sure to cover all its parts and explain them. Discuss it with the landlord and give them a chance to ask questions. Working with real estate landlords means collaborating with the landlord to help them determine the ideal price for their property. Then, you can conclude the transaction reasonably quickly and go away with another satisfied client.