A "message" from Message - What does the term "CMA" mean?
Have your ever noticed, Realtors seem to have a language of their own?
To many a new Buyer or Seller, it would appear that salespeople fall into the habit of talking in some strange and unknown tongue in order to confuse them…
I remember the first time I ever heard the term, “C.M.A.” I said to myself, probably it means Canadian Medical Association or something like that. Well in some circles that may very well be true, but when applied to Real Estate I was astonished to find out it meant something entirely different.
Human nature being what it is; most people do not wish to appear ignorant and therefore they do not stop and ask their meaning.
Ok; so what does the term “C.M.A.” mean?
In its simplest form “C.M.A.” means “Competitive Market Analysis”. That may have help somewhat, but perhaps you might be more familiar with the term; Appraisal. Maybe you’re one of the fortunate few who have ever seen an Appraisal.
Appraisals are most commonly used by the Banks. They use them to determine a loan value ratio for a property one of their customers may wish to mortgage; usually at the time of a purchase.
Most accredited Appraisers use at least three other similar properties to derive a value for their subject property. They use properties which have recently sold, (hopefully in the same area). In their report they include details of the comparable properties; however there’s one major drawback, they do not include active or expired listings in their final report. So, appraisals are in fact historical reports of real property value for a particular time.
So what’s the difference between an appraisal and a C.M.A. which is prepared by a professional Realtor?
In the hopes of keeping things simple, certified appraisals cost money, and depending on the size and type of the property they can easily run into a significant amount money. Where as a professional Realtor will provide one for their customers as a normal course of doing business.
A Professional Realtor when preparing a Competitive Market Analysis for their customer will attempt to use between 10 - 15 similar properties: these will be selection of Active listings, as well as Sold and Expired listings. The Active Listings tell the customer what completion the subject property is up against. Solds give the customer the understanding of what similar properties are currently selling for, while Expireds let the customer know what prices are too high for the market. This additional input gives a customer a more complete picture; which, I believe when reviewed properly will help both the customer and the professional Realtor to arrive at a more suitable conclusion.
Now there’s always the question in the mind of every Buyer or Seller; is now the best time to be thinking about buying or selling…
I recently reviewed an item which was originally published by the Canadian Real Estate Association, (a National Association) which may address that question partially. (You may read the entire article on the previous link): “January results suggest that the national resale housing market may be past the recent peak,” said CREA Chief Economist Gregory Klump. “One car doesn’t make a parade, so a few more months of results showing a cooling trend will be required before talk of a Canadian housing bubble begins to fade. It could take until the second half of the year before a cooling trend becomes evident, since home buying activity may continue to be accelerated in the first half of 2010 by expected interest rate increases, and by the introduction of the HST in Ontario and British Columbia on Canada Day.”
As consumers, we should be aware of reports such as the one from CREA, but we must realize, both Appraisers and Market Researchers pay little attention to data other than actual sale values, including pricing and numbers when addressing the market. Very little or no influence is given to Active Listings or Expired Listings, but Professional Realtors know they are truly needed in order to give their customers a balance in which to understand their Current Market Conditions.
So with so much uncertainty in the world is this information really relevant in today’s market? Is the Market moving upwards or is it dropping? What will it be like in six months from now or six years? Is now a good time to buy or should I wait? And I grant you, these are all good questions.
Regardless of the external influences currently affecting us, life continues to go on. People will continue to fall in love and get married. They will continue to have families and of course as their young families begin to grow they and their children will need to look for housing to meet their specific needs. Another factor to consider, families today are very dynamic. Not only are they mobile, they are either increasing in size or reducing as age takes over, either way there will be a continued need for housing.
One other consideration to take into account today is the ever increasing number of broken families. That phenomenon puts a whole other dimension on the housing market. Whereas before when one home was sufficient for their family needs, now because of family breakups, they’re producing a need for two separate housing units instead of just one.
As the increase in the demand continues for new housing thus there will be and ever increasing need for a truly informative Competitive Market Analysis: both for the Seller (in order to price their home competitively) and for a Buyer (in order to purchase their dream home at the right price).
Hugh Message
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Hugh Message Macdonald Realty 1st Pioneer, 22424 Fraser Highway, Langley, BC V3A 8N3 Bus: 604-530-4111 Fax: 604-530-3707
Ref: http://www.hughmessage.com/blogs/hugh_message/archive/2010/03/02/a-message-from-message-what-does-the-term-c-m-a-mean.aspx