California Real Estate Broker ExaminationValuation and AppraisalHard
A real estate broker is preparing a Comparative Market Analysis (CMA) for a client who wishes to list their single-family home. The broker identifies three comparable properties that recently sold. Which of the following is NOT a typical step a broker would take when conducting a CMA?
- AInspecting the subject property and selected comparables.
- BAnalyzing current market conditions and trends.
- CAdjusting the sales price of comparables for differences in features.
- DCalculating a capitalization rate for the subject property.
Show answer & explanationAnswer & explanation
Correct answer: D. Calculating a capitalization rate for the subject property.
Calculating a capitalization rate is part of the income approach to valuation, primarily used for income-producing properties. A CMA for a single-family home typically relies on the sales comparison approach and does not involve capitalization rates.
Why the other options are wrong
- A. Physical inspection aids in making accurate adjustments and understanding value drivers.
- B. Analyzing market conditions is crucial for accurately pricing any property.
- C. Adjusting comparables is a core part of the sales comparison approach used in CMAs.
Comparative Market Analysis (CMA)
A CMA is an informal estimate of a property's market value, often performed by a real estate broker, based on recent sales of similar properties, current listings, and expired listings in the area.
- Not a formal appraisal.
- Primarily uses the sales comparison approach.
- Aids sellers in pricing their homes and buyers in making offers.
Memory trick: Compare, Adjust, Analyze, Advise – CMA's rise!