Buy a Home: Comparative Market Analysis

The best way to set a price is to do a Comparative Market Analysis (CMA). You can either:

• Get some help: Start an offer and a Redfin agent will call to help you do a CMA.
• Do it yourself: Follow the step-by-step instructions on this page.

When you work with Redfin, you get great advice you can trust. Our agents are experts on pricing and negotiations who earn a salary, benefits and bonuses based on customer satisfaction. They don't earn commissions.

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A Comparative Market Analysis (CMA) is a neighborhood survey of recently sold homes that are similar in size and style to the home you want to buy. Buyers, sellers and real estate agents use a CMA to establish a fair price range for a home.

In a CMA, the home you want to buy is your target home, and the homes to which you are comparing it are "comparables." Preparing a CMA consists of five steps:

1. Set criteria : define the criteria for choosing comparable homes.
2. Choose comparables: assemble your list of comparable homes.
3. Drive by: learn what you can about your comparables from the outside.
4. Create summary statistics for your list of comparables.
5. Estimate the value of your target home with these statistics.

We'll go through these steps for a 4,000-square foot, 4-bedroom, 3-bath Victorian home in the Pacific Heights neighborhood of San Francisco. But keep in mind that:

• Condo prices tend to be more volatile than house prices.
• Homes on the outskirts of town or in gentrifying areas may be more volatile in price.
• And of course, any property can gain or lose value.

This is the most important step: the wrong comparables will yield the wrong price range.

You need to evaluate at least three comparables. But if they're good, you don't need more than five comparables to do a CMA. Criteria to consider:

• Type: do not compare condos to houses.
• Neighborhood & school district: only evaluate comparables in the same neighborhood and school district as your target home.
• Date of sale: In a fast-changing market, more recent comparables are best.
• View, waterfront access: don't compare homes with waterfront to homes without waterfront, or homes with great views to homes with partial or nonexistent views.
• Size:: comparables should be within 15% of your target home's square footage.
• Number of beds and baths: exclude properties with significantly more or less beds and baths. Comparing homes with 3, 4 and 5 beds is ok; comparing homes with 1 and 2 beds is not.
• Age and style of home: if you have enough data to be picky, exclude homes built at different times and in different styles.
• Condition of home: this is relevant only if it differs greatly from your target home. For example, don't compare a fixer-upper to a recently remodeled home.
• Lot size and usability of land: lot size is a significant factor only when the difference is big; for example, a home with an acre of horse pasturage can't be compared to one with a modest yard.

For our 4,000-square foot, 4-bedroom, 3-bath Victorian, we'll compare houses that are between 3,500 and 5,000 square feet; have 3, 4, or 5 beds, and 2 to 4 baths. We have plenty of comparables, so we'll only consider Victorian houses. We're not too concerned about the age of the home or the lot size; few homes in San Francisco have a yard, and most Pacific Heights homes were built before World War II.

Now that we've set the criteria for choosing comparable properties, we can begin to build our list. To find potential comparable properties on the Redfin map:

1. Set the neighborhood: in the field to the top left of the map, type Pacific Heights.
2. Turn on past sales and set your search criteria:
1. Click Price, Beds... to the right of the search box to see search options.
2. Under Property Type, include only condos or houses. In our example, we want only houses, so we'll click to remove the check from Condo.
3. Under Include, check Sale records, and in the drop-down below, choose Last 6 months. If this returns too many records, choose Last 3 months.
4. Set criteria: beds, baths, square footage, lot size, year built. Don't filter on price. We choose 3+ beds, 2+ baths, between 3,500 and 5,000 square feet, with lot size and year built unconstrained.
5. In the Status drop-down (bottom right) choose Active + under contract.
6. Click Search Listings. Blue icons showing past sales will appear on the map alongside green icons showing current listings. If your search returns more than 500 results, zoom in to narrow the range of results returned.

Set Your Search Criteria

3. Adjust the map's zoom-level until it includes ten to fifteen past sales. If there aren't enough comparables, adjust your search criteria (step d) to include more beds and baths, or broaden the range of past sales included (step c).
4. Look at the list below the map for summary statistics, including median price, square footage and price-per-square-foot. If you don't see the list below the map, click the Change View link above the map and select Map and List from the display options. The list includes homes for sale (green icons) and previously sold properties (blue icons). Black icons show listings without a disclosed address.
5. Download the data by clicking the Download Results link to the left of the list.

Zoom In and Download to Excel

You'll have the same homes that were on the map in a spreadsheet. Now see them live.

If you've been touring homes, you've probably seen a lot of listings already. The more homes you see prior to making an offer, the better informed you'll be about pricing.

Drive by each of the comparables you included in your spreadsheet. You can't go into homes that were recently sold, but you can get a good sense of the neighborhood and evaluate the home from the outside. Take notes on:

• The yard: landscaping, slope, and size
• The condition of the exterior: painting and general repair
• The view, at least as much as you can tell from the street
• The traffic and noise level
• Whether it has a garage

Once you've driven by all the comparables, add comments from your notes to your spreadsheet. Delete homes that seem to be poor comparables now that you've seen them. You only need three to five good comparables for your CMA. And focus on past sales only, because those prices are proven by the market. Delete any listings from your spreadsheet.

For our Pacific Heights target home, we found five comparable houses that were sold in the last six months. During our driving tour, we took notes on each. Then we added a new column called "Comments" to our spreadsheet and put the most relevant notes in there.

Comparable Properties

Now you're ready to look at the summary statistics for your selected comparables. Add a column to your spreadsheet for price-per-square-foot, which you can calculate by dividing the price by the square footage for each comparable, as illustrated in the yellow column below. At the bottom, calculate the average statistics across all your comparables.

Comparables, including Price Per Square Foot

For our target home, the average price-per-square-foot of the comparables is $853. Price-per-square-foot is an important benchmark for the market value, but there's a lot of variation around the mean due to a home's maintenance level and special features. In our example, the homes with a view and a garage, respectively, commanded the highest price-per-square-foot of the set. The one that was a little run down had the lowest.

Check your comments. If the list-price-per-square-foot of your target home is well above the average price-per-square-foot of your comparables, make sure you know why. Does it have a view? A new kitchen? Is it better constructed, or in great shape? These characteristics are all relative. If all your comparables have garages, a garage in your target home shouldn't mean it is priced above the average.

To calculate a fair value range for your target home, multiply the average price-per-square-foot of your comparables by the square footage of your target home. This will provide a baseline for the market price. In our case, this is $853 per square foot multiplied by 4,000 square feet, which yields a price of $3.41 million, or just under the list price of $3.5 million.

Then, if the target home has characteristics that make it more or less desirable, adjust the value up or down to account for them. In our case, our Pacific Heights Victorian has a garage, which makes it more desirable, and the kitchen was recently redone. We estimate that the house is worth between $3.45 and $3.7 million.

Finally, realize that the value yielded by your CMA need not be your opening offer price, which can depend on many factors. After you start an offer, a Redfin agent will call you to review your CMA and discuss your offer price. In many cases, your Redfin agent will have access to recently closed sales and pending sales data that are not yet on Redfin.com, and can add that data to your CMA. Once you make an offer, your agent will guide you in your offer price and negotiations. Happy hunting and good luck!

Ready to get started on a CMA? Enter your neighborhood below.