What Is A Comparative Market Analysis?

A comparative market analysis is essentially an analytical process used when estimating a specific home's value, as per Rocket Mortgage. This property value estimation process is considered to be a tool when approached from the perspective of real estate agents. To establish the estimated value for a given property, a person who performs the comparative market analysis will consider regional location and market-connected notions of desirability for the home in question.

The analysis will also take into consideration both recently sold and similar properties from within the general vicinity of the home of focus. These are known as comparable sales and generally include three properties for comparison. In certain instances, establishing the fair market value for a given home may prove challenging. This is because multiple factors influence how much a property will be worth on the market, including the house's age, lot size, and the quality and number of its interior and exterior features.

Why perform a comparative market analysis

As RISMedia explained, a variety of different reasons exist for real estate professionals to both perform and provide a comparative market analysis. First, the comparative market analysis process can set the stage for appropriate comparisons. Specifically, the process empowers real estate professionals to ensure that they are comparing sufficiently similar pieces of real estate in a given region. This helps these real estate professionals provide accurate price calculations. (And whether one is a real estate seller, purchaser, or agent, much of the market depends on reliable and verifiable economic calculations in connection with properties.) 

Second, the comparative market analysis process aids real estate professionals in both noting and responding to broader property trends throughout time. Lastly, whether one is buying or selling the property of interest, having accurate information with respect to similar properties can bolster informed real-estate-based decision-making and avoid common pitfalls, such as overpricing and overpaying.