Have you ever been startled when you saw the total bill at a restaurant or received your credit card statement that was abnormally higher than expected? Personally, I lead a rather frugal life, but sometimes I say, “to hell with spending!” » without thinking about the end of the month… I tend, probably wrongly, not to scrutinize my statements too much. No doubt because from one month to the next, the amounts to be paid are approximately the same. But when the amount owed reaches double the usual reading, it is possible that I become more inquisitive… So, in these moments, you like me perhaps, we quickly target the highest amounts… the ones that stand out. Dave Music, $3270.97 “ah yes the guitar, it was this month! , Restaurant Chez Alexandre Leblanc: $890.27 – Yes, yes, yes, it’s true, it was me who collected the bill, we went a little hard on the digestifs!  Gasoline here, market there, well, well everything is in order!”.  So, unenthusiastic, faced with the facts, we pay the bill without question and with peace of mind.

I’m sharing this with you because I wanted to offer you what might be a little secret:

In real estate, there is an exercise that ties in with this anecdote, and it is called a Comparative Market Analysis (CMA). A CMA is a method of analysis that gives you one of the most powerful tools when it comes to negotiating the purchase or sale of a property. It helps you determine a price value based on facts when done rigorously. And if this methodology doesn’t mean anything to you, I encourage you to read on.

Shopping for a broker leads us quite instinctively to consider a few criteria:

• The commission rate
• The broker’s experience
• His or her presentation
• His or her popularity
• His or her ability to inform us
• Our general ease with this person
  
  

That said, selling or acquiring a property at the best possible price should logically be at the center of our concerns. However, few of these criteria allow us to conclude with confidence that the price that will be asked will be the optimal one.

No one wants to sell at a discount or overpay. No one wants to learn that he or she could have asked for much more or paid much less. This is where the CMA takes on its full meaning! A broker who proceeds diligently will be able to reassure you on this point before committing you to a contract.

The Comparative Market Analysis in broad terms:

The goal of a CMA is to estimate the market value of a property as accurately as possible.

It is an exercise in comparing value between properties with similar characteristics: size, age, location, date of sale. You guessed it, the more similar the characteristics, the easier it is to establish a reliable market value.

A CMA is ideally carried out by local real estate agents who are intimately familiar with the market and the specifics of a neighborhood and its impacts on value.

This point is important since more and more brokers are no longer limited to a particular territory, new technological advances helping.

What are the steps of a CMA:

1- Data collection of the property for sale:

A broker gathers information about the subject property (the subject for sale). This information ranges from the characteristics of the property and its environment to the amount of taxes levied.

2- Data Collection of the target market:

The broker selects similar properties that have recently been sold. The broker documents their last price sold, their characteristics, their date of sale, their age and completed renovations.

The broker accumulates and maintains market statistics: whether sales are slowing down or not, what is the demand for this type of property, what are the average sales times, how does the sale price compare to property assessments, what is the inflation in the market and so on.

3- Normalize comparables:

Unless you buy a condo in a tower with several units. It is difficult to find perfect comparables. Since the goal of the CMA is to establish a fair market value for the target, a competent broker must carry out calculations that will help iron out the disparities. In other words, if all the comparables were identical, we would average the price between the comparables to establish a selling price with an inflation factor. But since it is almost impossible to find perfect comparables, the broker may need for example to add or subtract a bathroom and adjust the sale price accordingly before suggesting a market value.

The number of rooms, the size of the property, the quality of materials, inflation in the market are just a few examples of calculations that must be carried out by a diligent broker to establish a fair market value of your property.

Conclusion:

The CMA is a negotiation tool that you can count on, particularly when coupled with an inspection. When numbers are backed with facts and not perceptions, there is less room for lengthy debates. And when concessions are made, they are made in an informed manner, with peace of mind.

C. Marcellin