How to Conduct a Comparative Market Analysis
June 19, 2024
A comparative market analysis is a form of report that aids an investor in valuing a property by comparing it to other properties that share similar features and have recently been sold in the same location. A typical comparative market analysis includes an overview and introduction to the property and the purpose of the report; a description of the subject property clearly stating its features and condition; a list of other comparable properties recently sold in the area; a comparison of the subject property to the other comparable properties basically highlighting the similarities and differences; an adjustment to the sales prices of these comparable properties accounting for the differences with the subject property; an estimated value of the subject property based on the previous adjustment; and a conclusion and recommendation.
To conduct a comparative market analysis, you want to start by identifying your subject property. In this process of identification, you should pay close attention to the location, size, age, and features of the property. This is the property that is set to be listed after it has been compared with other similar properties to ascertain the sales price. Immediately after identifying this property, the next phase of your research would be to make a list of other comparable properties in that same location, highlighting their location, size and layout, age and condition, amenities and features, and sales price and date. This could typically be three to five comparable properties.
Immediately after the identification of these properties, the following task is to perform a concise analysis of the subject property and the selected comparable properties. Mostly, this process involves noting their similarities and differences. Some other items of note in this step are sales price and price per square foot, days on market and sale-to-list price ratio, features, upgrades, condition, and age.
After identifying these differences and similarities, your next line of action is to adjust the initial sales prices of the subject property to account for all that has been noted. This way, your comparative analysis has aided in reaching a conclusion that helps your property level up with other properties being sold in the location. This increases your chances of making sales when you finally list the property because nobody would want to get a property that sells lower than other properties or a property that sells higher than other properties.
Finally, you need to refine your analysis. You should consider additional factors that may affect the value of your property. These factors include market trends and seasonality, the local economy and employment rates, school districts and amenities, property condition, and needed repairs. A thorough comparative market analysis provides valuable insights into the subject property’s value and market position. This aids you in making informed decisions in the real estate industry and ensuring a successful outcome for buyers, sellers, and investors alike.