Today chalk’s worth more than cheese
CMA = Comparative Market Analysis. Strange animal.
Since November last year all licensees have been required to compile a CMA for every new listing.
For some agents CMAs are easier to compile because of the style of property they deal with. The houses in some agent’s areas are all very similar. Similar size & shape, similar construction, similar section sizes, etc. Easy to do a CMA there I suppose. Like pricing a used car. The difference in value between neighbours could be judged by the relative freshness of the paint or the tidyness of the garden. Give me rows and rows of Coronation Street houses any day!
Don’t get me wrong, I’m not moaning about having to sell homes in leafy Remuera. It’s a nice place to work. BUT – you couldn’t get a more different place from Coro Street physically, literally, geographically, topographically. It’s not uncommon for a house to sell for $1million, then the somewhat nicer house next door sells for $3million. Go figure!
I have respect for our valuer colleagues but I’ve always marvelled at how difficult their job is (especially in non-Coro areas). How on earth do they accurately value a home when they’re comparing sales of homes they’ve never been inside? I suppose the answer is ”they do the best they can with the tools, knowledge & training they have”. Oftentimes valuers get it right, but sometimes they get it wrong. When agents are asked to (now required to) ”appraise” someone’s home they suffer from the same human condition. They sometimes get it wrong too. I certainly have.
So how do real estate agents (in areas unlike Coro St) provide CMA’s that are as reliable (or even more reliable) than a valuer’s registered valuation? I’m glad you asked.
Having spent many hours poring over sales statistics to do CMAs this past month, I believe the only way an agent can be accurate (or even close to accurate) is if the agent has been inside the homes they choose to insert into their CMA.
Of course it’s impossible for agents to internally inspect every home that has sold, but the next best thing, to further improve the industry’s professionalism and accuracy, is to change the way CMA’s are done.
Imagine this new rule if imposed by the REAA: ”At least 20% of properties used as comparisons must have been inspected internally & externally by the agent who signs the CMA”. (Or how about 40%?)
Consider the implications of such a rule change:
- Agents would need to caravan more properties (better product knowledge)
- Rookies would need manager or experienced agent input (in line with the new Act/REAA philosophy)
- Would ’low market share’ agencies get to see 20% of all listings? (highlights limitations of low market share)
Totally agree Steve. I wonder how long it will be before some poor lisencee gets hauled up before the new board to explain their over/under valuation of a property?
I would also love to meet and chat with the souls that drafted the new Act and added this requirement. Have they ever worked at the coalface as a valuer/real estate salesperson? Do they have any understanding of the difficulties in valuing homes especially the non Coro types that can have plenty of emotional quotent or x-factor buried in their value. Take the same house on the same piece of land and turn the house 45 degrees, all other things being equal – different percpetive, different look and feel from the road, different attitude to the sun/wind/neighbours house etc = different value.
Floor area is the same, state of renovation, address, etc etdc etc.
It is these small differences that we have to deal with in our professional estimation of market value. How can someone put value on things like superstition for instance. Some buyer groups will not buy a house with a number 4 on the letter box, 4 steps to the front door, the front door opening South, the back door in a straight line from the front door. Less buyer market = less buyer competition. Has to affect price right?
I love the concept of having to view home interiors of comparable properties.
Our office has kept a flyer of all homes we have sold in the last four years. Added to this flyer which has internal photos and basic house information we add sale price, date, how it was marketed, how long it took to sell etc. This database of flyers has now become an invaluable resource for our licensees for CMA preparation especially in the light of the new Act. We are also required to keep a copy of all CMA’s in case we ever have to make an account for our valuations. Forwarned is Forarmed
Steve,
When doing a CMA how does one ever get it accurate price for a property. Like what david has said there are so many variables involved. When dealing with the public your dealing with two parties who are always going to be different than two others. In this case if you had two sets of people dealing with the same property your price will be completely different.
Are you using the CMA to price or to educate the vendor to what has sold in the area. Seems like such a fine line to me.
Thanks David, your system of having years of property brochures is great and I reckon will help you immensely. Your accuracy is bound to be better than someone who doesn’t have a tool like that. We too are keeping a copy of every CMA on the property file within our office.
Imagine the ugly client exchanges that would precede being ordered by the REAA to provide a CMA as evidence that your CMA was well researched? I suppose there will be cases like that in the near future – bags not me!
Thanks Deon, I see where you’re coming from but not sure if you’re at the coalface at the moment? Am I right saying you’re not listing/selling at the moment – I’ve not seen you associated with Harcourts for a while? In answer to your question, post Nov 17, a CMA is used to backup and justify the estimated appraisal price. Interestingly, if agent and client agree, the asking price could be set miles above the CMA & estimated appraisal price. It’s a free country!
In the pre Nov 17 world it was common for a client to have expectations higher than the market would bear. Nothing in that respect has changed post Nov 17. The reality of the post Nov 17 world however is that agents are now likely to be held accountable for throw away lines on a $500,000 home like “let’s see if we can get $600,000″. In the past, that type of exchange between agent & client would translate in the clients mind as “that agent said I could get $600,000″. It’s crazy how often I’ve seen that scenario develop and many agents were, and would still like to, play the game that way. However now they can’t.
In a scenario where a home is worth around $500,000 based on recent sales data, an agent who doesn’t want to get off side with the client (read: wants to buy the listing)might be tempted to find and insert a sale or two (perhaps not comparable) around the $600,000 mark. The agent then has a further dilemma about the ‘estimated appraisal price’ which is a single price that must be written on every listing agreement so that likely commission can be estimated. So you have an agent who deep down statistically thinks the house is worth $500,000 but is swayed to over-promise by their desire for income. The agent’s biggest fear used to be that the property didn’t sell, but perhaps now their fear should be that they are ‘found out’ and charged for providing an inaccurate or misleading CMA.
The ideal situation where a $500,000 client wants to try and get $600,000 is for the agent to provide a genuine CMA with relevant sales stats and an estimated appraisal price much closer to $500,000 than $600,000. In this way, if the agent/client relationship starts off on the right footing I reckon it’s likely to end happily. I can see quite a few agencies being cancelled once a client with particularly high expectations receives a genuine accurate CMA.
The whole CMA requirement is a whole new tricky ball game that I’m still feeling my way through.
Hi Steve, the concept and issue around the now required CMA clearly shows that there is now far greater responsibility on the agent to “get it right” from the start of negotiating with clients when selling their property. It brings a new meaning to doing your homework thoroughly and getting the test answers correct! I say bring it on!!
Not being on the coalface of selling / listing as yet, I can’t but agree with Mr Garrett in that it would make for an interesting conversation with the persons who thought this rule into existance. Furthermore I agee with you entirely on your “non Coro” like areas, besides the physicality of some of these homes, there will always be the emotional and traditional content to deal with.
I am intrigued though on reading that there are people out there that are superstitous about certain numbers when buying a property – brought a smile to my face.
On open2view.co.nz you can retain all your sold properties so all the information and pictures remain there. (I have suggested realestate.co.nz should do the same)
If you are preparing a CMA and a competitor sold a house that you have not seen inside you can at least look at the photos as per the sold listing if they too use the open2view site. Add Street View, Property Guru and http://www.myaddress.co.nz to the research mix and you can get a much better overview than was available in the past – but nothing beats an actual inspection of the property.
For an example see http://www.nz.open2view.com/Agent/11371/Ross/Brader
Scroll past the current listings and the solds are listed below those.
Thanks Mitch, best luck with your studies, can’t wait to see you in the trenches.
Thanks Ross, great info. I don’t know anyone in NZ who would have such vast knowledge of their patch as you do! Your systems and local knowledge are fantastic. Agree realestate.co.nz really should implement your suggestion, it would make everyone’s life so much easier, especially when doing CMAs. Any comment Alistair?
[...] when complaints are made and cases are tried in Court. I’m not alone with this view, check out Steve Koerber’s blog on the subject. Now back to the topic at [...]
[...] when complaints are made and cases are tried in Court. I’m not alone with this view, check out Steve Koerber’s blog on the subject. Now back to the topic at [...]
[...] when complaints are made and cases are tried in Court. I’m not alone with this view, check out Steve Koerber’s blog on the subject. Now back to the topic at [...]
[...] complaints are made and cases are tried in Court. I’m not alone with this view, check out Steve Koerber’s blog on the subject. Now back to the topic at [...]