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E A
Avoiding
CMA
Mistakes
By Dirk Zeller
Agents make three major mistakes in the CMA
preparation process: They work to establish a high
sales price, they include too many comparable
homes in their comparison, and they overemphasize the
price per square foot. Here’s how to avoid the traps:
Overpricing. If you approach a CMA with the desire
to establish the highest sales price for the Seller, more
likely than not, you’ll end up with an overpriced
listing. Remember, the goal of a CMA is to determine a
demonstrated indication of the true current value of the
home. You’re not looking to develop an opinion of what a
Buyer might view as a reasonable value. You’re working
with facts to arrive at an objective, accurate valuation.
Explain the purpose of the CMA to your Seller and
achieve a meeting of minds that you are not working
to justify the highest price but rather to reflect market
conditions and arrive at an accurate value in order to
present and sell the house in a timely manner.
arrive at this figure by taking a sale or listing price and
dividing it by the home’s square footage. For instance, a
1,500 sq. ft. home listed at $425,000 has a $283.33 price
per square foot.
I personally believe price per square foot has a limited
effect on value. For one thing, it doesn’t account for
the quality of a home – the quality of the finish work,
the baseboards and casings and moldings, the marble
floors, granite countertops, elegant appliances, top-grade
bathroom fixtures, and landscaping extras. It doesn’t take
into account such factors as stone exterior, paved patios,
extra garages, or architectural design features. Price per
square foot treats each home like a box on a plain vanilla
lot. It doesn’t evaluate anything that really makes a house
a house. Yet Agents and consumers use the calculation
as if it were gospel – often using it to defend low offers
– when in reality a long list of other factors make the
price per square foot calculation either meaningless or
erroneous.
Presenting too many comps. I’ve seen Agent-produced
CMAs that include 15 or 20 comparable homes in each
category: sold, pending, active, and expired. Do the
math – the result is up to 80 home prices to review and
enough information to confuse even the most analytical
Seller. Beyond confusion, many Sellers latch onto the
most unreasonably priced home in the review, wondering
why they shouldn’t at least start at the price the people on
Mulberry got, even though its price is $20,000 over current
market value. Here’s my advice: Once you select four to
six comps for each category, stop gathering information
and begin assembling your CMA into final form
Putting too much emphasis on “price per square foot”
findings. When comparing prices, Agents often calculate
the price per square foot of comparable properties. They
Dirk Zeller is recognized as the premier coach for
the real estate industry. He is one of the most sought
after speakers and authors for high volume production
while attaining life balance in the real estate industry.
Dirk is the President of Real Estate Champions. Real
Estate Champions provides exceptional business and
developmental training to real estate agents and managers
through cutting edge coaching programs and seminars
including the “Four Day Work Week System Program.”
Visit their web site at Real Estate Champions. © 2010,
Dirk Zeller. All rights reserved. For information contact
FrogPond at 800.704.FROG(3764) or email susie@
FrogPond.com; http://www.FrogPond.com.
ExecutiveAgent Magazine 27