A home’s listing price is determined by the seller, usually with a comparative market analysis prepared by the listing agent. The analysis compares the home with similar properties that sold recently and with homes currently for sale nearby, then adjusts for differences in size, condition, location and upgrades to arrive at a supportable price range.
What is a comparative market analysis?
A comparative market analysis, or CMA, is an agent’s study of what similar homes have recently sold for, what is for sale now and what failed to sell. It is the main tool used to recommend a listing price.
A CMA usually looks at three groups of properties:
- Recent sales. What buyers actually paid for similar homes. These carry the most weight.
- Pending sales. Homes under contract, which hint at where the market is right now.
- Active listings. The homes yours will compete with. These show what sellers are asking, not what buyers will pay.
Listings that expired or were withdrawn are useful too, because they show prices the market did not accept.
Which homes count as comparable sales?
The best comparables are homes that sold recently, are close by and are similar to yours in the features buyers pay for. The closer the match, the fewer adjustments are needed and the more reliable the result.
- Location, ideally the same neighborhood or tract
- Living area, bedrooms and bathrooms
- Lot size and how usable the lot is
- Age, style and number of stories
- Garage, pool, views and similar features
In tract neighborhoods in Murrieta or Temecula, close matches are often easy to find. On acreage and custom properties, such as those in Temecula Wine Country, there may be few similar sales, so the analysis takes more judgment and often a wider search area or a longer look back.
How do condition and upgrades affect the price?
Condition and upgrades move a home up or down within the range the comparable sales set. A well maintained, updated home can usually support a price near the top of that range, while deferred maintenance or dated finishes pull it lower.
Not every improvement adds what it cost. Buyers tend to pay for things like an updated kitchen and baths, newer roof and systems, and good flooring and paint. Very personal projects may add little. Other factors can matter as well, such as whether a solar system is owned or leased and whether additions were permitted.
Is an online home value estimate accurate?
An automated online estimate is a starting point only. These tools use public records and recent sales data, but they have not seen the inside of your home and cannot tell a remodeled kitchen from an original one or account well for views, lot differences and condition.
They tend to be least reliable where homes vary a lot from one to the next. Use the number as a rough reference and compare it with a CMA based on a visit to the property.
Is a CMA the same as an appraisal?
No. A CMA is an agent’s opinion of a likely price range, prepared to help you choose a listing price. An appraisal is a separate opinion of value prepared by a licensed appraiser, most often ordered by the buyer’s lender after an offer is accepted.
The two can differ. If an appraisal comes in below the contract price, the buyer and seller may need to renegotiate or find another way to close the gap, which is one more reason to choose a price the recent sales can support.
Who makes the final decision on price?
The seller does. Your agent recommends a range and explains the reasoning, and you choose the number based on the data, your timing and your goals. To go over the numbers for your home, you can contact Aimee.
Frequently Asked Questions
Does the listing price equal what the home will sell for?
No. The listing price is an asking price. The sale price is whatever a buyer and seller agree to, which can be lower, the same or higher depending on demand and the terms of the offer.
Should I price high to leave room to negotiate?
It is your decision, but a price well above what comparable sales support can reduce showings and lead to a longer time on the market. Ask your agent to show you how similar homes priced at different levels have performed recently.
What if my home is not getting showings or offers?
Review the feedback and current competition with your agent. Price is one possible cause, along with condition, photos, marketing and how easy the home is to show. Any of these can be adjusted.
Does what I owe or what I paid affect the listing price?
No. Buyers base offers on what similar homes are selling for, not on a seller’s loan balance or purchase price. Those numbers matter for calculating your net proceeds, not for market value.
Want to Know What Your Home Could List For?
Aimee Ghafouri is a real estate agent based in Temecula who grew up in Murrieta and works with buyers, sellers and investors across the Temecula Valley and southwest Riverside County.
Aimee Ghafouri, 951 Properties, CAL DRE #02193341. This page is general information, not legal, tax or financial advice. Equal Housing Opportunity.
