8 Critical Adjustments in a CMA

1. Property rights
2. Conditions of Sale (Motivations of buyers and sellers)
3. Financing terms
4. Market conditions at the time of sale
5. Size
6. Location
7. Physical features
8. Economic characteristics

When preparing a Comparative Market Analysis, it would be prudent to place the most weight on sold properties while preparing another CMA with currently listed property. Investigate reasons as to why certain comparable properties have been withdrawn from the market or have been rented out as income property. When making adjustments, be sure to ascertain what the preferences are of a typical individual in your delineated market area. Be prepared to periodically re-evaluate market conditions and make adjustment to any relevant changes in financing, market perceptions, shifts in both lending and government policy, and supply/demand functions. Make quantitative adjustments only when there is supportable market evidence.

Oftentimes, it is difficult to ascertain what the market truly values certain components of a house, especially in respect to factors which influence valuation in a non-linear manner. Ranges can be set using qualitative approaches. Extreme care must be given in making sure certain elements are not factored twice, such as the case for adjusting both for size, and number of rooms. If too many adjustments need to be made, the possibility that the comparables are really not comparables must be considered.

If it is difficult to ascertain certain adjustments, than each comparable should be weighted differently, to reflect the quality of the data. Remember, CMA’s can give an indication of value but personal judgment must be made on the degree of influence each factor has, and the quality and quantity of the data available in determining with what degree of confidence you stand by this indication.

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