For most of us, purchasing a home is the largest payment that we will make. Yet a home is also one of the most difficult things to place a value on - purchasing a home isn't like going to a discount warehouse and picking up a box of cereal for the best price on the market. Every home is unique and valued differently and overpaying for a home can erase years of savings from careful grocery shopping.
Comparative Market Analysis
Typically, a comparative market analysis (CMA) is prepared by a real estate agent in order to advise a seller of the market value of their home. They can then list it at a price that will sell within a few months and not languish on the market, while driving buyers to purchase the listings in the neighbourhood that are correctly priced. Home buyers should also obtain a detailed CMA before submitting an offer, so that they can purchase with knowledge and avoid overpaying. A CMA is prepared by examining sold prices of similar properties in the neighbourhood and adjusting those prices up or down to consider the differences in size, features, location, market conditions, etc. between the subject property and the recent sales. The comparable sales that required the least adjusting for differences (ie. matched the subject property most closely) receive the highest weighting when determining the price for the subject property.
Municipal Tax Assessments
Can one just estimate the market value of a home that you are interested in from a tax assessment statement? Many municipalities have assessment information on line. The answer is no - for several reasons, there is no direct correlation between a tax assessment and the market value of a home. Tax assessments use a mass appraisal process using data for a group of properties. The purpose of a tax assessment is to apportion taxes and the result is referenced to a date in the past year, not the present. Comparative Market Analysis involves consideration of a list of attributes specific to the property and detailed viewing of the exterior and interior of the home.
Working with a Real Estate Professional
A real estate agent is trained in the preparation of a comparative market analysis and has the data needed to complete the CMA. Your representative is required to act in your financial interest. When home buying, ensure that you receive a detailed CMA before you submit an offer.
About the Author
Peter Fuchshuber is a residential and commercial real estate professional in Edmonton, Canada. He can be contacted through his website.
