Carrie George has been selling real estate at a high level on a full-time basis for over 20 years in Northwest Colorado. She serves her small county of about 16,000 people near Colorado’s beloved ski resorts. And yet, despite it being a resort market with a smaller population, Carrie has been able to sell the equivalent of almost a house a week over the past year and build a business with an annual production of $25 million.
Her approach? Using the CMA.
Every real estate agent knows how important listings are to their business. And Carrie has figured out how to use the CMA to price her sellers’ homes the right way the first time.
Carrie lives in an area where every home is different. In other words, her town is not filled with neighborhoods with the same common floor plans. To be successful, Carrie had to get granular on how to price the homes correctly. A mentor first taught her how to do a CMA over 20 years ago when she became an agent and she’s been using it ever since. You read that right. The same system and methodology still work today.
Arguably, the most important aspect of a CMA is that it’s done and explained in a way that connects with the seller and enables them to understand how pricing is determined. While the program may be different market to market, the overall concepts behind how to use a CMA correctly are the same no matter where you’re located.
Read on for the 4 key philosophies behind doing a CMA to price a home.
1. Explain why a seller should want to use the same methodology that an appraiser uses. You know that a buyer will likely use an appraiser as a step in the buying process. Therefore, it’s ideal to use the same methodology as an appraiser so that the seller doesn’t risk getting the pricing wrong and holding up the transaction at the appraiser stage. Some agents use a price per square foot analysis. Carrie, however, finds that this type of assessment only works if all of the houses used in the process are the same.
2. Be particular when picking sold properties to compare your seller’s home to. Carrie says that it’s key to pick homes that are geographically close to where the home is located or in the same subdivision. Pick comparables that are similar in size, age, and location to the house. Carrie tries to pick four comps. You’ll want to compare the homes with a focus on certain characteristics: the bedrooms, bathrooms, finished square feet, lot size, year built, and garage stalls.
3. The goal is to make the comps as equal as possible to the subject property. Therefore, you’ll either subtract or add dollar values to the comparables to make them as similar as possible. Carrie always uses the same adjustment formula for standard CMAs – and these adjustments haven’t changed in more than two decades. Your numbers may differ slightly from Carries, so she recommends reaching out to your favorite appraiser and asking them if these numbers feel appropriate to them to use for a CMA. Carrie says she continually checks in with a appraiser on the numbers she uses and has found they continue to provide her with accurate final pricing. Carrie’s adjustment include the following: – Bedrooms: $12,000 per bedroom – Bathrooms: $4,000 per full bath, $2,000 per half bath – Finished square feet: $50 per square foot – Year built $500 per year – Garage stalls: $12,000 per bay
4. Review the CMA report with your clients. Carrie’s CMA report provides a low price, high price, and recommended price. It also shows the adjustments that were made to each comparable property during the analysis. This detail stands out as a striking difference to those who may just use a price per square foot analysis and provides Carrie with more thorough data on how the ultimate price recommendation was determined.
Remember, it’s not just the pulling of a CMA report that will benefit your clients, it’s how you go about adjusting the data on the CMA so that sellers can truly understand why their home should be priced where you recommend. Especially in today’s market, pricing properly is key so that your sellers aren’t spending additional unnecessary days on the market. If you’re an Inspire Member, download Carrie’s checklist on doing a CMA correctly to prevent your sellers from chasing the market. Not an Inspire member? Find out how to become one here.