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This form is used by a property owner, their agent or a buyer’s agent as a worksheet when estimating a property’s gross monthly rental value based on rents recently paid for comparable properties, then noting in each property’s column for itemized features distinguishable from the owner’s property the dollar adjustment needed to correct for its greater or lesser rental value than the owner’s property.


Your use of RPI Form 318-1

Sticky prices and the recalcitrant seller dilemma

The resistance sellers have to set or adjust their asking price at declining market prices is a phenomenon called the sticky price syndrome.

Sticky pricing always occurs in recessionary times. The seller understands all property prices have peaked, that prices paid by buyers are lower every month — net equity today, gone tomorrow. Yet that seller is unwilling to lower their asking price or the sales price they will accept on an offer.

For wide-eyed listing agents, a recalcitrant seller fast becomes a waste of their energy, time, and talent: a black hole. The marketplace of real estate sales with inventories growing and sales volume shrinking indicates the necessity of an asking price to be reasonably close to what today’s buyers are paying.

Before an agent marketing a property for sale can attract a qualified buyer who will close a purchase escrow on the seller’s property, the seller needs to hold reasonable pricing expectations. When they do not — or will not — the seller’s agent needs to back away from this prospective client for their lack of rational behavior.

Sellers who follow this illusion — and their agents who enable it to persist — will see the property sit on the market and the listing expire with the property unsold. No chance of a fee despite the agent’s efforts.

Longer days on market — shopworn listings — convince prospective buyers something is wrong, either with the property, the owner or their agent. The market has had a look at the listing and rejected it, only to leave it orphaned. It has not sold while others have. As a consequence, the seller now receives offers at lower prices than had their agent been authorized to market the property at a realistically competitive price from the first posting of the property for sale — a listing consistent with current market conditions for optimal fast closings.

To assure — educate — the seller they are listing the property at an asking price which appears reasonable and will attract buyers quickly before prices slip further, a seller’s agent prepares a comparative market analysis (CMA) and reviews it with the seller.

The CMA is a critical tool an agent uses to inform themselves, and the seller, about realistic pricing buyers are paying to acquire similar properties at the time of the listing.

When the seller accepts the agent’s price analysis — known in the industry as a broker price opinion (BPO) — the agent achieves the objective of an asking price that is at or sufficiently close to prices buyers are currently paying which will attract buyers and offers. With pricing no longer an issue and a property staged with “curb appeal,” the agent can effectively concentrate on locating a buyer qualified and ready to purchase the property. Escrow, we are on our way. [See RPI Form 318 and 318-1]

Comparative Market Analysis and the BPO

A CMA is a form filled out by an agent to work up an opinion about the market price of a property — the BPO. Using the worksheet, the agent compares attributes and amenities of a seller’s property to similar properties in the area that recently sold, called comps.

The agent analyzes the information gathered and entered on the itemized CMA checklist. The agent then reviews it with the seller to come up with an informed listing price for the property — i.e., the seller’s asking price. The agent will use the seller’s asking price to market the property for sale.

To attract potential buyers, the asking price in the agent’s marketing adverts need to be:

  • reasonably close to recent sales prices and asking prices of comparable properties;
  • an amount likely to encourage buyers to make offers; and
  • likely to result in a closed sales transaction. [See RPI Form 318]

An agent gathers information for use in a CMA by downloading a property profile on the property to confirm:

  • the vesting;
  • any liens on the property;
  • property tax status;
  • any foreclosure notices; and
  • use restrictions other than zoning.

The agent also prints out a report on recent sales in the surrounding area from a title company website.

From the recent sales report, the agent pulls data on comps recently sold in the area and enters them on the CMA form.

A seller’s agent uses a CMA worksheet for:

  • establishing the price of the seller’s property for the seller [See RPI Form 318]; and
  • setting rents for a seller’s single family residence (SFR) held out for rent. [See RPI Form 318-1]

CMA for setting rents

The pricing of any income property begins with a study of the income the property produces or will produce. A property’s income is exclusively rents paid by tenants for space they do or will occupy, called rental income.

The property’s annual income and expenses are disclosed to prospective buyers on an operating spreadsheet, called a profit and loss (P&L) statement.  The rental income is the first item on the statement; the most significant and the most important. Simply, no income = no value as an income property.

All operating expenses and ownership obligations (mortgage debt/income taxes) are analyzed and judged as percentages of the rental income.

When the amount of income is erroneously presented, the expenses and ownership obligations stated as percentages are distorted. Worse, the bottom line end result of a property’s operating statement is the amount of Net Operating Income (NOI) the property produces annually for ownership.

As always, the NOI together with the capitalization (cap) rate a buyer determines is applicable to their investment in the property sets the market price the buyer of an investment property will offer to pay to acquire the property.

When the rental income is overstated, say, just 5%, the NOI will be overstated at around 15% greater than it actually is. On applying the buyer’s cap rate to this distorted NOI, the result is an excessive price at around 15% over market for the property.

Building the case for setting rental income

To determine the amount of rent tenants are currently willing to pay for units in a property — space — the listing agent needs to know what tenants are presently paying for units/space in comparable properties.

For gathering and analyzing rents in comparable properties, the listing agent may use a Comparative Market Analysis to Set Rent — Single Family Residence form. It is a worksheet used repeatedly for each type of unit or space in the income property. The agent notes the distinguishable features of comparable rental units/spaces from the listed property and enters a dollar adjustment needed to correct for the comparable property’s greater or lesser rental value than the listed property. [See RPI Form 318-1]

The Comparative Market Analysis to Set Rent sets forth the following aspects on the subject property and three comparable properties:

With adjustments entered and totaled, the agent arrives at an adjusted monthly rent for the comps, a BPO for rental amount. [See RPI Form 318-1 §§8 and 9]

Informed by a review of the comps, the seller and the agent set the monthly rent a buyer may reasonably expect the property to generate. The operating statement the agent makes available to interested investors and their agents will set the annual rental income as justified by comparable properties, not scheduled income expectations. The CMA is the supporting documentation. [See RPI Form 318-1 §10]

Revision history

Form navigation page published 01-2023.

Form updated 2014.