This form is used by a property owner, their agent or a buyer’s agent as a worksheet when estimating a property’s sales value based on prices recently paid for comparable properties to reflect observations on a visual inspection of the 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 value than the owner’s property.
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 the market price
Both a seller’s agent and a buyer’s agent use a Comparative Market Analysis for Setting Values form to determine prices buyers recently paid for comparable properties. On an analysis, the agent develops their opinion about a property’s market price, which is communicated to the seller. [See RPI Form 318]
The comparable properties always have some features distinguishable from the seller’s property. The agents make dollar adjustment on the CMA worksheet to reflect the lesser or greater value of the comps based on the agent’s observations. [See RPI Form 318]
The Comparative Market Analysis for Setting Values confirms price adjustments for:
- zoning [See RPI Form 318 §2.1];
- easements [See RPI Form 318 §2.2];
- use restrictions governed by covenants, conditions and restrictions (CC&Rs) [See RPI Form 318 §2.3];
- retrofitting or water conservation improvements [See RPI Form 318 §2.4];
- location factors, including:
- neighborhood trends;
- street amenities;
- lot size and shape;
- vehicle access;
- schools/churches/institutions;
- utilities available; and
- environmental hazards and nuisances [See RPI Form 318 §3];
- landscaping features, such as:
- the quality;
- maintenance costs;
- the condition of the soil; and
- topography [See RPI Form 318 §4];
- improvements, including their:
- age;
- type;
- highest and best use;
- design/style;
- energy efficiency;
- maintenance and obsolescence;
- exterior conditions; and
- interior conditions [See RPI Form 318 §5];
- livable space, documenting the:
- gross livable square feet;
- number of bedrooms;
- number of bathrooms;
- kitchen/appliances;
- existence of a:
- living room;
- dining room;
- family room;
- basement/storage; and
- attic [See RPI Form 318 §6]; and
- amenities, including a:
- fireplace/woodstove;
- pool;
- fence;
- patio/porch/deck. [See RPI Form 318 §7]
A completed CMA confirms the market price of the seller’s property based on what buyers of comparable properties have been recently willing to pay. Thus, the agent sets their BPO for the property. [See RPI Form 318 §10]
Form navigation page published 01-2023.
Form updated 2014.
Form-of-the-Week: A comparative market analysis for setting prices and rents — Forms 318 and 318-1
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Nice comparasion. Now I have some basic information about two notion