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What Is a Comparative Market Analysis?

A comparative market analysis might look at several duplex.
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  • Written By: Kristie Lorette
  • Edited By: O. Wallace
  • Last Modified Date: 18 November 2014
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A comparative market analysis is a tool in real estate sales and purchases to determine the sales and buying price. A comparable market analysis evaluates the sales and list prices of similar homes to the subject property, which is the home that is on the market or about to go on the market, to determine its approximate value.

The information required to create a comparative market analysis can typically be obtained from the public records from the county where the property is. Another source of the information required to conduct a comparative market analysis is the information from the Multiple Listing System (MLS), which is the computerized listing system that real estate agents use to list and search for properties for clients.

When conducting a comparative market analysis, it is typical to pull a minimum of three comparable properties. A comparable property is the same type of property, such as a single-family home, condominium or duplex. A comparable property also has the same or similar square footage as the subject property. The amenities of the property should also be similar, and a true comparable property is within a mile or so of the subject property.

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When conducting a comparative market analysis, the seller of the home uses the information collected to determine the price range they should list their property for sale. A buyer uses a comparative market analysis to determine a fair price for buying a property. Property appraisers use tools similar to a comparative market analysis to determine the market value of a property as well.

It is generally advised by real estate experts, appraisers and mortgage lenders that when gathering the information to do a comparative market analysis to use six total properties. Three of the properties should currently be on the market, but still fit all of the other criteria that makes the properties comparable. It is also recommended to use comparable homes that have sold within the last three to six months.

In a situation where a homeowner is considering refinancing a mortgage or taking out a second mortgage, they may have a comparative market analysis done to see if the home will appraise for a high enough value to refinance it at the home’s current mortgage balance. The homeowner may also use a comparative market analysis to see if the home has acquired enough equity to either establish an equity loan or take some extra cash out of the home.

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