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 Investigate reasons as to why certain comparable properties have been withdrawn from the market or have been rented out as income property.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.

Any questions or for FREE customized Market Reports, automatic email updates on properties that fit your criteria, or Realtor Referrals, please EMAIL ME or call me at 734-478-9270. -Anwell Tsai

Mortgage Rates below 5%!

Fixed mortgages have fallen below 5%. Large banks such as JP Morgan, Chase & Co., and Wells Fargo have lowered rates as the Fed Reserve have substantially increased their purchases of mortgage securities backed by Fannie, Freddie, and Ginnae Mae.

Homeowners can take advantage of these low rates if their financial house is in order. Investigate whether refinancing makes sense for you. Make sure your credit score is in order. Oftentimes, simple computer glitches and accounting problems can have an extremely expensive impact on your loan.

Any questions or for FREE customized Market Reports, automatic email updates on properties that fit your criteria, or Realtor Referrals, please EMAIL ME or call me at 734-478-9270. -Anwell Tsai

Waiting for the Bottom

Sounds quite simple, right? Wait for housing prices to bottom out and purchase a home at the lowest price and then sell at the top of the market. The problem is, due to market inefficiencies, one never knows when the market hits rock bottom, until it is too late. It is extraordinarily difficult to forecast the market with any degree of certainty. Real Estate is affected by too many unpredictable factors.

Unlike the Capital Markets, information is quite sparse and difficult to obtain. Real Estate is affected by micro factors that may influence an extremely small market area, limiting the usefulness of broad market indicators like the S&P Case/Shiller and OFHEO house pricing indexes. Due to issues of liquidity and costs, transactions are few and often reflect past market tendencies. Prices for homes can reflect negotiations in a market environment several months and even years before the actual closing and reporting of the figures. Contrast this with stocks where companies are regulated and must regularly disclose financial statements. Shares are traded in real time with new prices reflecting changes in market behavior.

It is important to differentiate between speculation and true market analysis. Investigate how stable your financial situation is, reflect on your motivation to purchase or sell, and then decide on a time horizon that is commensurate with your goals. These are factors that should be weighted more heavily than the speculative stance of waiting for the bottom. Otherwise, one might be waiting for Godot!

Any questions or for FREE customized Market Reports, automatic email updates on properties that fit your criteria, or Realtor Referrals, please EMAIL ME or call me at 734-478-9270. -Anwell Tsai