Here is a layout of how I Dwain Ammons, WNC Broker® PSA, SFR® will help you determine the appropriate listing price for your property.
Single Figure or Probable Sales/Lease Price
- North Carolina allows flexibility for brokers to report a sales price or a lease price as a single figure or as a probable price range.
CMA – Comparative Market Analysis Basics
- A comparative market analysis (CMA), which may also be called a competitive market analysis, is not an appraisal and shouldn’t be referred to as one. Only licensed appraisers can perform appraisals.
- A CMA is an opinion of a property’s market price range and is used to help the you the seller establish a probable listing or lease price.
- It’s my duty to perform CMAs competently.
- When completing a CMA, a quick sale of comparable properties usually indicates the market for similar properties is good.
- Expired listings can tell me the price at which a property won’t sell, which I usually reference to show sellers what might be an unreasonable sales price expectation.
- I will use comparable properties that have sold in the last three to six months when completing a CMA.
CMA Steps
- Collect data on your property.
- Collect comparable data using the MLS or a similar database.
- Make adjustments to your property for differences between the comparable property and your property.
- Present the CMA to you the seller.
North Carolina BPOS and CMAs
The terms “BPO” and “CMA” are used interchangeably in North Carolina.
A CMA can’t be used for appraisal or financing purposes.
Competency is key when preparing a CMA, and preparing a CMA incompetently is grounds for disciplinary action.
North Carolina CMAs can’t be used to value properties, only to estimate a sale or lease price.
No-Fee CMA
- Performed when there is a brokerage agreement in place as part of regular brokerage services.
- Can be prepared by licensees with a provisional license.
- Is NOT required to conform to North Carolina Administrative Code (21 NCAC 58A.2201-2202) or North Carolina General Statutes (N.C.G.S. § 93A-83).
For-Fee CMA
- Is performed for a fee outside of a brokerage agreement.
- Must be prepared by individuals who have at least a non-provisional real estate broker’s license.
- Must conform to both North Carolina Administrative Code (21 NCAC 58A.2201-2202) and North Carolina General Statutes (N.C.G.S. § 93A-83).
- Must be presented in writing.
- Must use standard methodology and provide objective opinions on selling/listing price.
- Cannot include an automated valuation model.
- I am required to personally inspect the inside and outside of each property for which I prepare a BPO/CMA unless the homeowner waives the requirement. Even if the requirement is waived, the real estate commission recommends both an interior and exterior inspection, which will result in a more accurate sales price estimate.
Measuring Residential Square Footage
- National standards say to measure to the nearest 10th of an inch but round to the nearest square foot when computing the number.
- Finished areas are the only spaces that can be included as living area.
- Finished spaces are only included if they are attached to the main property via finished stairways or hallways.
- Finished spaces are only measured if the ceiling is at least seven feet in height, and there is a permanent heat source (there are exceptions if the space is under a stairway, sloping ceiling, or beam that reduces ceiling height).
Developing a CMA for a Customer
- To develop a CMA, I will compare the subject property with other properties in the area.
- The sales comparison approach to estimating property value is used to prepare a CMA.A properly prepared CMA will offer a real estate professional’s informed price opinion, but it’s not an appraisal and shouldn’t be referred to as one.
- When preparing a CMA, data from expired listings, pending sales, and active listings, as well as knowledge of the local market, are utilized to arrive at a suggested list price for the subject property.
- A well-prepared CMA is a keystone to a successful listing presentation.
- The CMA process includes gathering data on the subject (your) property, doing research on comparable properties, and then adjusting the comparable sales prices up or down based on how they compare to the property in question.
- Gather data on the subject property by researching:
- The property
- The neighborhood
- Property improvements
- Research comparable properties by:
- Using at least three comparable properties that are valid examples
- Using comparable sales that occurred no more than six months previously
- Adjust for differences
- Always adjust the comparable property’s sales price, not the subject property.
- If the comparable property is inferior to the subject property, I will add the difference in the amount to the comp’s sales price.
- If the comparable property has better features, I will subtract the appropriate amount from the comp’s sales price.
- Estimate a probable listing range
- Give you the seller a probable range of values to consider, based on your market research.
Calculating Proceeds and Profit to the Seller
- Sales price = (net amount + mortgage or other expenses) / (100% ? commission rate)Sales price x percent to seller (100% – commission %) = net to seller
- To find the rate of profit or loss, use the following formula: (price sold ? purchase price) / purchase price
- To find the original price when a loss was taken, divide the sales price by 100%, minus the profit rate.
- When using the T-bar method, plug the known values into the correct places. If the line between the known values is vertical, multiply to solve the problem. If the line between the known values is horizontal, divide to solve the problem.
- To find the original price when a profit was made, divide the sales price by 100%, plus the profit rate.
Other Considerations in Determining an Appropriate List Price Range
- A suggested list price range depends on several factors: · As uncovered in the comparable number crunching.
- Market price: Is it a buyer’s market, a seller’s market, or somewhere in between? How much competition is out there, and how is it priced?
- Expired Listings: Are all available comparable properties expired listings? If so this could be an indication of an issue with the marketplace.
- Seller needs and motivation: Do they need top dollar or a quick sale? What’s their loan balance? Seller needs, desires, and motivation: How much do they need to net?
- How much work is the seller willing to do to make the property market ready?
- How much work is the seller willing to do to make the property internet marketing ready?
- Short Sale: Will the proceeds be sufficient to pay off the outstanding mortgage debt, closing cots, brokerage fees, etc. Will the seller can convey a fee simple marketable title?
- If a foreclosure action is a possibility, the listing agent must have an open and honest discussion about all Foreclosure options with the seller before signing a listing contract.
Residential Five-or-More-Unit Properties and Other Income-Producing Properties
- Gross Rent Multiplier and Gross Income Multiplier
- Gross rent multiplier (GRM) and gross income multiplier (GIM) are used to evaluate the value of income-producing property for investment purposes.
- For buildings with five or more units, the GIM would be used to determine value. This is sales price divided by annual gross income.
- For single-family houses (where the primary use is as a rental property) and for two- to four-family units, the GRM, which is sales price divided by monthly gross rent, is used.
- Analysis Using the Income Capitalization
- Direct income capitalization converts a single year’s income into an estimate of value using a capitalization rate. There are two ways to do it, both of which involve analyzing data from comparable properties:
- Using a recently-sold comparable property’s capitalization rate
- Analyzing the component parts of a comparable property’s capitalization rate
- Analyzing a Capitalization Rate’s Component Parts
- Compute a capitalization rate for a subject property by analyzing the capitalization rate of a comparable property and breaking it down into its component parts, which are (capital recapture) return of investment and (interest or rate of return). An estimate of the component parts for the subject return on investment property is then made.
- Straight line and market extraction are two methods used to compute a capital recapture rate (the return of investment or the amount borrower which is equal to the principal.
Dwain Ammons,Realtor®,
C2EX, e-PRO®, PSA, SFR®
Marketing Specialist (LMS), Sales Specialist (LSS), Service Expert (LSE), Target Marketing Specialist (TMS), Relocation Specialist (LRS)
Allen Tate | Beverly Hanks Realtors®
Hendersonville Office
Phone: (828) 447-0036
Lake Lure Office
Phone: (828) 447-0036
The North Carolina Real Estate Commission requires me to provide my clients with a Working With Real Estate Agent Brochure. Click on this Mandatory Brochure LINK for your copy. View the NC Fair Housing Disclosure Here
DISCLAIMER
All information deemed reliable but not guaranteed as listings and properties are constantly being updated.
Dwain Ammons Certifications/Memberships/Licenses:
MLS of Burke County NC
e-PRO® Certified
PSA – Pricing Strategy Advisor Certified
SFR® – Short Sale and Foreclosure Resource Certified
(C2EX) NAR Endorsement – Commitment to Excellence (C2EX)