CRE Comparative Market Analysis: What to Look For

You’ve identified the property you want to buy. Yet the sales price seems too high or too low. Which is it? A comparative market analysis (CMA) helps you figure that out. By comparing sold properties in the surrounding area that have comparable features, you can identify the more realistic sales price in the current market.

What is comparative market analysis in commercial real estate?

A comparative market analysis (CMA) in commercial real estate gives the potential buyer information that helps them make a realistic assessment of a property’s value. The analysis compares the property to those that have recently sold in the surrounding area. It factors in similar features — square footage, the number of rooms, features, updates, etc. — that give the buyer a reasonable picture of what it is worth in the current market. This is not an official appraisal but is more of an informal assessment the buyer can use when negotiating a sales price.

How do I create a CMA on MLS?

First, in order to create an accurate value of a listing, you need to compile a list of characteristics you need in order to compare with properties that have sold nearby. These include: location, total square footage, the year built, recent renovations, the number of bathrooms, and more. You also want to gather the property’s tax information, such as its assessed value and millage rate.

From there you can search the MLS or other tools for data on sold properties in the area. Look at how long it took for the property to sell: If the property sold quickly then you know the asking price was too low; if it took a long time, you’ll know the price point was much too high.

Now you can compare the sold properties by matching them to your own. Make sure to only look at comps with relatively recent closing dates, as markets can fluctuate by season. Once you have a list of all those sales histories, put them together, from lowest to highest, to give you a sense of the range of properties sold that are similar to your own.

How do I run comps?

Typically, it’s your appraiser or realtor who will research comps on your behalf using the MLS. However, if you want to do it on your own and do not have access to the MLS, you can search public property records or online sites like Zillow, Trulia, or Realtor.com; these sites allow you to search for properties sold using filters like zipcode.

What is the difference between a BPO and a CMA?

A CMA, or comparative market analysis, has much in common with a BPO, or broker price opinion. They both provide information to potential buyers about the properties they are considering. They are sometimes used interchangeably; nevertheless, it is important to make the distinction between the two in order to know which one works best for the property you are considering.

First, the BPO includes an assessment of the same factors the CMA assesses, such as total square footage, location, and features. However, it is less reliant on comparable properties and takes into account the opinions of the buyer’s realtor. In some states, a real estate license is required to perform a BPO. Another difference is that the length of time and cost can differ.

How do you calculate CMA?

The best way to calculate a CMA of a property you want to purchase is to divide the sales price of comparable homes by their square footage. That will give you the price per square foot. For example, if a 2,800 square foot home sold recently in your neighborhood for $200,000, the price per square foot is $71.43.