The Minneapolis/St. Paul real estate market is one of the fastest-growing in the nation. As demand for housing grows, the average value of Minneapolis homes has increased by 5.7% over the past year. Minneapolis real estate agents will be competing with other real estate brokers for the attention of potential sellers. One of the most important ways a Minneapolis real estate agent can differentiate themselves from the competition is by conducting a thorough comparative market analysis.
What is a Comparative Market Analysis?
A Comparative Market Analysis (CMA) is how real estate professionals price a property. This analysis is based on similar homes in the current market. These properties are either recently sold or currently for sale. CMAs utilize various data and comparison points to evaluate a property’s value objectively. Learning to conduct a CMA accurately is a crucial skill for any real estate agent who wants to accurately price their listings in Minneapolis’ competitive market.
Using a CMA to Determine List Price in Minneapolis
How are comparative market analyses conducted? Real estate professionals should have a rigorous Comparative Market Analysis process to price the subject property correctly. To estimate the price range of any given property, follow the following steps.
Collect data on the property in question (including previous listing data).
To start, you will need to compile all relevant information about the property. How many square feet? How many bedrooms? Where is it located? When was it built?
Additionally, look into the sales history of the property. What was the selling price the last time the property changed hands? How has the market changed since then? Are there active listings in the neighborhood? Analyzing the property’s previous sale data will help you adjust your estimate. Various CMA software programs will help you compile this data, but you can also find this information in the local tax record when looking for property values.
Analyze the sale price of recent home purchases in the area.
Look for comparable sales (or “comps”) in the surrounding area. For example, how many 2 bed/2 bath homes were sold in the same neighborhood? How long were similar condos on the market before they sold? What is the square footage of other homes sold in the area? Comps are invaluable in building a more robust understanding of the Minneapolis real estate market. However, make sure you’re not making oranges to apples comparisons. There’s no need to compare a property for sale if it is not comparable in size, etc. While taking any fluctuations in the market into account, recent sales can help you evaluate the subject property’s listing price.
Look for other similar properties currently on the market.
Just as you analyzed comparable sales, the next step in your CMA should be an analysis of active comps. What are similar properties on the market at the same time as the subject property? What is their selling price? How is their selling price affected by any differing characteristics (location, recent renovations, unique characteristics, etc.)? While you may use active comps as a basis on which to make your estimate, it is essential to consider all the data regarding the subject property. Remember that the more comps you use to price the property, the more accurate the listing price is.
Compile your final analysis to share with clients.
Finally, you will need to prepare your CMA in an easily digestible and simple way for potential clients to understand. While you have put in hours of research and have sheets of numerical data that have helped you reach your conclusion, you should present your suggested pricing and market analysis to your clients in a compact, simplified manner. Preparing a presentation template beforehand can help you compile this information efficiently and uniformly for each new seller.
Common Pricing Misconceptions
As you learn to conduct accurate market analysis, you may work with sellers with commonly held pricing misconceptions. When selling a home, one of the most common misconceptions is that the property is worth at least what they paid for it (if not more). However, the market fluctuates quickly. As a result, and depending on the area, the economy, and the length of ownership, the home may have devalued.
Another misconception is that any renovations the owners have done on the home will automatically raise the property’s value. While major renovations may be considered in the listing price, it depends significantly on the upgrades in question. In some cases, while the renovations may be special features to note on the listing, they may not ultimately impact the listing or sales price.
A Thorough CMA Will Result in More Listings
Why is it so essential to follow these steps when listing a property? Agents who approach listing appointments with a thorough, comprehensive CMA are more likely to impress potential sellers with the extent of their market knowledge. Present yourself as an experienced agent and watch how much easier it is to win listings. Building up your skills in preparing a CMA can lead to seller leads and the growth of your real estate business.
