Tips & Tools : CMA

What to expect from your real estate listing agent

RE.com Tips & Tools — Mon, 06 Aug 2007 15:18:00 GMT

Find out what to expect from you real estate listing agent when you are selling your home. Learn which questions to ask your REALTOR®.

The moment you decide to sell your house, you're faced with a long list of decisions and chores. A listing agent can help you through the process, from listing to closing.

You're putting a major financial transaction into his or her hands. And once you sign a contract, you must stay with that agent or firm for the duration, typically two to six months. You will pay a pre-agreed commission of four to six percent of the sale price of your home or a flat fee stipulated in your contract. So meet with several listing agents and ask about their plans for marketing your home. Here's a guide to what you can expect a listing agent to do for you.

A comparative market analysis
After doing extensive background research, an agent should present you with a detailed and free comparative market analysis (CMA). The CMA compares your house to similar homes in your area that have recently sold based on size, features and market data, including current economic conditions, crime statistics and school information. Using this information, the agent suggests a listing price.

Recommended improvements
The listing agent tours your home and suggests improvements that will increase its appeal to potential buyers. Buyers are attracted to houses that don't require much work and your agent may recommend you do some minor repairs, install new carpet, redecorate or paint.

Marketing plan
Go over an agent's detailed marketing plan thoroughly before you sign a listing contract. Here are a few common marketing techniques you can expect an agent to include in the plan:

The "For Sale" sign in your yard, which should identify the agent, the agent's company and give a phone number. Make sure that there will be somebody on the other end of that number from morning till night seven days a week, to answer any questions from house-hunters.
Fliers that include a picture of your home and a description of its size and features. A box of fliers can be attached to the For Sale sign. Your agent may also distribute fliers to other real-estate offices in the area, which may have clients who are looking for a home like yours.
A preview of your house for other real-estate agents. The tour usually takes place within the first week or two your house is on the market. Ideally, the agents will return with clients. You may want to offer a perk such as food or a raffle to entice agents to attend.
A listing in the Multiple Listing Service (MLS), which is a database of all the homes in a given area that are listed by registered users (which includes the vast majority of agents). Your listing agent will write up a listing that details your home's qualities and attach a photo. Other agents will see it when searching the database for properties that match their clients' criteria. You may want your house to be listed in several MLSs, as some areas overlap.
Advertising in local newspapers, magazines and the Internet, which can generate viewings of your home by house-hunters. According to a 2003 survey of homebuyers and sellers conducted by the National Association of REALTORS®, 93 percent of homebuyers use the Internet to search for homes.
Open houses which – like ads – are meant to generate traffic through your home, and create some word-of-mouth interest.
Showings of your home. Your listing agent should coordinate times to show it to potential buyers and for other agents and their clients to see the house. Your agent should give you enough warning that viewers are coming so that you can tidy up the house. He or she should also give you feedback from the people that tour your home, which will help you improve it for the next showing.

Offers and closing
Soon after your home goes on the market, offers should begin to come in. Your listing agent can ensure that potential buyers have adequate financing, though you may still require buyers to have pre-approval from a lending institution. The agent can also accompany the inspector when he or she examines your house, help you negotiate a sale and estimate closing costs.

How Much Is a Home Worth?

RE.com Tips & Tools — Fri, 08 Jun 2007 18:46:00 GMT

Appraisers, brokers and insurers may have different opinions of a home's value.

If you’ve ever tried to figure out how much a home is worth, you may have become very confused by the wide variations among real estate valuations that can be used. These definitions may help:

The asking price is the amount the owner of the property believes the property may be worth or the amount he or she may be willing to accept from a buyer who wants to purchase the property. The asking price is set by the seller, often in consultation with a real estate agent, when the property is offered for sale.

The purchase-offer price is the amount the buyer believes the property may be worth or the amount he or she may be willing to pay the seller to purchase the property. The offer price is set by the buyer, again often in consultation with a real estate agent, as part of the buyer’s purchase offer.

The market value is the agreed-upon price that the seller is wiling to accept and the buyer is willing to pay for the property.

A comparable market analysis, also called a competitive market analysis or CMA, is an opinion of the property’s value that’s prepared by a real estate agent, usually to help the seller determine an asking price or help the buyer determine a purchase-offer price.

A broker price opinion or BPO is also prepared by a real estate agent and may be equivalent to a CMA in some parts of the country. Lenders use BPOs to set asking prices for properties they’ve acquired through foreclosure or other means. BPOs also may be used in such situations as ethics hearings or lawsuits that involve real property.

An appraisal is an opinion of a property’s value that’s prepared by a state-licensed real estate appraiser. An appraisal is based on the location and condition of the property and prices of recently sold comparable properties. Lenders typically require an appraisal paid for by the borrower as part of the home loan process.

An automated valuation model or AVM is a computer program that uses statistical analyses of home sales in a local area to generate estimates of property values, which may also be called AVMs. AVMs tend to be more accurate in established subdivisions that contain large numbers of very similar homes and less accurate in rural areas or areas where neighboring homes are very dissimilar to one another. An AVM may differ from the market value or appraised value for the same property.

The tax-assessed value is determined by a state or local tax assessor to levy property taxes and other ad valorem assessments. The tax-assessed value is rarely the same as the asking price, purchase-offer price, market value or appraised value of the property.

The insured value is the maximum amount an insurance company could pay on a homeowner’s insurance claim if the home were damaged or destroyed in a fire or other covered disaster. The insured value considers the size and features of the home and the estimated cost per square foot to rebuild the home, but shouldn’t include the land value. The insured value doesn’t guarantee that the home could be rebuilt for that amount.

Home Value Estimations

RE.com Tips & Tools — Wed, 28 Feb 2007 18:07:00 GMT

A home value estimation relies on different information than a comparative market analysis from your REALTOR®.

Home value estimations (HVE) are automated reports using complex algorithms and public records to estimate your home’s market value. They’re user-friendly, usually requiring only an address and other simple information. And, depending on the depth of your research and how quickly you want the report, they are usually inexpensive or even free. But an HVE is not a direct substitute for a comparative market analysis (CMA).

First, while CMAs and HVEs have similar outputs, they have different inputs. A CMA is based on your agent’s expertise as well as recent sales figures for similar houses in your area. An HVE also uses sales stats but because it relies on public databases, it may be using slightly different numbers.

An HVE may provide data that is not included in the CMA from your agent. Depending on which company you get it from, the report could include information about the property, a description of comparable houses, its tax value and community features such as demographics and price trends.

There’s also an advantage in the fact that the HVE is an objective analysis,. While not perfect, it can help you determine whether the house is worth the asking price.

The HVE does have drawbacks. The public records used may be inaccurate or incomplete. And because an HVE is automated, the report doesn’t take into account your home’s physical features or its marketability. Things like upgrades that would increase your home’s value or excess deterioration that would decrease it are not part of the HVE evaluation. This is where your REALTOR®’s expertise is a major asset.

The good news is that you don’t have to choose one or the other. Since both are either free or inexpensive, you can get both a CMA and an HVE. If the results are drastically different, talk to your real estate agent about how he or she came up with the figure.

Negotiating the Best Price

RE.com Tips & Tools — Thu, 11 Jan 2007 21:57:00 GMT

It takes a keen understanding of the home-buying process to be good at negotiating. Be sure you have it down before you make any offers on homes

Be sure you have the process down before you make any offers on homes. Here are tools and information the best negotiators use:

CMAs — Comparable market analyses

Once you’ve found a home you want to buy, the first step in negotiation is to assess the fair value. CMAs show what similar properties in the area have sold for. Your real estate agent will have access to CMAs and can share them with you.

Generally, CMAs list houses in a particular location that are currently on the market, have sales pending, have expired from the market or have sold. It is the "sold" properties you need to look at because the list price and the offer aren’t necessarily the best indicators of what the house will sell for. There can be a big discrepancy between the two figures.

The CMA often gives you general information about the houses being compared: number of bedrooms and baths, square footage, the listing price and the sold price. Make sure you focus on houses similar to the one you’ve selected — both in description and location. The more recent the data, the better.

Condition

Once you have the CMA, drive by all of the properties listed in the sold column. Condition has a lot to do with the ultimate selling price of a house. Does the home in which you’re interested shine above or fall below those sold? Make a realistic comparison of condition, then adjust your thinking up or down according to what you see.

Extra amenities

Does the house you’ve chosen have more or fewer amenities than comparable homes? Although amenities won’t affect the value as much as location or condition, they can be a factor. Be wary, though. An outdoor hot tub may have been a major motivating factor in your choice of a house, but it won’t add much to the value of the property when you resell.

Motivation

A good negotiator gathers as much information as possible on the house and the sellers. The owner’s reason for selling is at the top of the list. Does she have to sell? Want to sell? Just throwing it on the market at a high price to see if it’ll move? If your agent representing you in the transaction is a buyer’s agent, they can try to secure this information for you. If you’re working with an agent representing the seller, they typically can’t disclose this information without the seller’s consent.

Preparation

Great negotiators always prepare themselves. The most important factor is your frame of mind. Never let emotions override common sense during negotiations. Set a realistic limit and stick to it. If the price isn’t to your liking or is outside your budget, walk away.

In addition to your emotional frame of mind, your finances should be in order. An offer carries more weight if there are no dangling financial problems and if you’re prequalified for a mortgage.

Realism

Make a realistic offer. Nothing turns a seller off more than a low-ball offer on a house that is fairly priced. Often, negotiations will stop, rarely to be revived again.

An example: Mr. and Mrs. Buyer find the perfect house after looking for months. The house is listed at $155,000.

Mr. and Mrs. Buyer have a CMA that shows average selling prices in the neighborhood to be $148,000 to $153,000. Ignoring the CMA, they offer $120,000.

Mr. and Mrs. Seller, annoyed at the low offer, counteroffer at full selling price, $155,000. The Buyers, still wanting to steal this house, make a second offer of $125,000. The Sellers, very frustrated, don’t move from their $155,000 price.

Suddenly, there is word that another offer is forthcoming from the Smiths. The Buyers up their offer to $154,000 and the Sellers accept.

A first offer in the $150,000 range (remember, the CMA showed $148,000 to $153,000) may well have been accepted by the Sellers. If this is the case, the Buyers have paid $4,000 more than necessary.