Licensee Pricing Tools: CMAs, Broker Price Opinions and AVMs

The Comparative Market Analysis (CMA) and Market Data Categories

A Comparative Market Analysis (CMA) is an opinion of value prepared by a real estate licensee to assist sellers in establishing a listing price and buyers in deciding on an offering price. A CMA is an informal estimate of market value and is not a formal real estate appraisal. State law varies across jurisdictions, but some states explicitly require a CMA to include a written statement declaring that it is not an appraisal. Salespersons must always understand that their pricing analyses serve to guide consumer decision-making rather than deliver certified valuation conclusions.

To build a reliable analysis, a CMA typically analyzes four categories of properties: recently sold, currently active, pending sale, and expired or withdrawn listings. Recent, verified arm's-length sales provide important CMA evidence because they show the actual prices buyers and sellers agreed to in completed transactions. In contrast, currently active listings demonstrate the subject property's direct competition in the current marketplace. While active listing prices show what current sellers are asking, they do not establish an upper limit on a property's value or predict its final sale price.

The remaining two categories provide insight into recent demand and market limits. Pending sales reflect current buyer demand and recent market activity, though final sale prices are generally not confirmed until closing. Expired and withdrawn listings can offer helpful clues about pricing and market response, highlighting figures that buyers may have resisted. However, a licensee must evaluate these carefully, as a listing may end for reasons other than buyer rejection of its price or terms.

When selecting comparables, licensees should choose properties from the subject property's neighborhood or competitive market area whenever suitable properties are available. Licensees should use the most recent relevant sales available. Sales from the past three to six months are often preferred, but the appropriate period depends on the local market and available data. Licensees also review days on market (DOM) for comparable properties to gauge market velocity and determine whether pricing in an area is realistic, while evaluating overall market conditions such as interest rates and local inventory.