How to run a Comparative Market Analysis (CMA) for homes in Austin

The comparative market analysis, or CMA, is an essential instrument in a broker's toolbox. Whether you are working with sellers to list a property, or helping a buyer make an offer on a property, knowing how to create an effective CMA is paramount. I had the pleasure of being schooled by one of the most ferociously awesome principal brokers of all time. New brokers in her office were not allowed to go willy-nilly about town. No way! First, we were required to take her classes on contracts, land use, clauses and CMAs. And they weren't the kind of classes that we "experienced" brokers use to pad our education hours (you know exactly what I mean). Contracts were read aloud, line by line, and dissected. Maybe we weren't lawyers, but we would know precisely what our contracts asserted and inferred. We would not hesitate when we wrote up that first earnest money agreement (although I did sweat profusely). The CMA class, however, will remain my favorite. Everyone thinks they know (instinctively?) how to construct a comparative market analysis. It's so easy, right? Common sense. I rarely see principal brokers these days caring one wit how their agents complete this "menial" task. But it's SO important! It is the foundation of our listing prices and sales presentations! And, if done right, it is a work of art. So, here is an annotated five-point guide to a worthy CMA. 1. The most important rule and most often violated when pricing Austin homes for sale: For-sale properties should never, ever, ever be used in a CMA for pricing a new listing. We keep running into agents who try and use a combination or some form of averaging of sold and unsold properties. Agents should use only like properties that have CLOSED in the past 90 days or less. Don't use word-of-mouth FSBOs or rumored builder-direct sales numbers, but only like properties that have SOLD, CLOSED and been RECORDED. Period. 2. A CMA should not be a lasso of the entire city of Austin, or what ever town or province you live in. It should specifically center around your subject property, much like a target: neighborhood, area, section. Start as close to your key property as possible, aiming to complete the CMA with homes sold in the smallest area practicable to achieve a good sample. If the home is so unique that it does not have comparable neighbors, establish a list of the property's distinct characteristics (selling points) and use that as your "neighborhood." At Austin Luxury Group, we specialize in unique homes and properties so we are often challenged by having no other comps or sales data to use in determining value. This is where real market experience and knowledge comes into play. We use land value, cost to build (COB) and cost of other improvements (COI) as well as factors such as sewer systems, water, live water, roads etc to formulate a valuation that "makes sense"  and then calculate demand. 3. Be an ageist! If your target property is an all-original 1950 Tarrytown ranch-style home surrounded by new construction, HELLO! You can't use all those new homes as side-by-side comparisons. These are not your comps and shouldnt be used in your calculation in pricing an Austin home. 4. Use your BRAIN. A comparative market analysis should not simply be an automated computer program provided by your local MLS. Instead, an artful CMA is a download of your personal real estate brain. When you look at your compiled list of comparatives, you should know these houses, having at least (AT THE VERY LEAST) done drive-bys, if not actually toured them when they were for sale or on a property tour. 5. Once your satisfied with your CMA and confident that your numbers are accurate its time to show them to the client and explain what your CMA means. In our business you sometimes have to sell your client before you can sell their property. Sellers are notorious for acting like "Dr Jeckell and Mr Hyde" meaning when it comes to their property its worth ALL THE MONEY and not willing to see their property through their super "critical eye" that they most certainly will employ when looking at properties to purchase. This we have realized is human nature for a vast majority of people. The solution we have found is simply pointing out this tendency out to clients respectfully upfront so that they realize when they start doing it, usually they will catch it and laugh with us with this starts happening. 6. Lastly, if your clients still have trouble with the number that you've proposed (whether it be for a listing or an offer), put them in the car. Nothing beats the personal experience of walking them through comparable properties (the COMPETITION). To us this process is the MOST CRITICAL because pricing a home incorrectly or being pressured by the client to price way above the market is a foolish operation that will cost you money, time and most of all reputation. Wouldn't you rather get the house priced right from the get-go, actually sell it and have everyone happy? And praising you for your genius-ness? ALL sellers think their home is worth more, or at least act like they do so as not to "leave any money on the table" so they push listing agents for a higher valuation. At the end of the day your clients will respect you more if you have good information, back it up with experience and stand your ground. They are hiring an agent to tell them what to do and run the show, if that's not something you're capable of as an Austin agent you should seriously consider referring you clients to an experienced listing agent and focus on the buyers side until you have the confidence and experience to handle the challenges and massive financial responsibility of being a good listing agent. Start every transaction the right way: with a solid CMA that not only proves your value as an agent but is brag-worthy. The Austin Luxury Group is experienced in listing properties in Austin and central Texas they can be reached at 512-656-5627 or at www.AustinLuxuryGroup.com

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