Real Estate Vocabulary #101
At least when it comes to residential real estate, when is a positive a negative, and a negative a positive?
Answer: when it comes to doing a Comparative Market Analysis (“CMA”), the tool Realtors — as well as appraisers — use to estimate a property’s fair market value.
CMA Math
So, paradoxically, if a Comp (“Comparable Sold Property”) has a nicer kitchen than the subject property (the home you’re trying to value), the appropriate adjustment is to subtract anywhere from $20k to $50k from the Comp (note: by convention, adjustments are always made to the Comp, not the subject property).
Alternatively, if a Comp has one fewer Bathroom than the subject property, the appropriate adjustment is to add $10k – $20k to the Comp.
Ditto for differences in curb appeal, condition, garage size, updates (or lack thereof), and lot and backyard features.
Done correctly — and with enough recent, nearby market activity to price off of — doing adjustments on 3-4 Comp’s generates a likely price range for the subject home.
Plus or minus 5% or so . . . 🙂
