As professional real estate investors in Hawaii, we are always here to help you understand as a buyer how to determine the best value for your property investment, or as a seller, to determine the most appropriate asking price. We’ll guide you through analyzing a comparative market analysis, or more commonly known as a “CMA”. We invite you to reach out to us with any questions whenever considering a real estate transaction, with zero obligation!
Let’s start digging into the data found in CMAs and housing reports. Perhaps the most important rule of thumb is the ‘apples to apples‘ approach. Any real estate professional trying to come up with the market price of a property should be comparing similar properties to the one in question. How do you define ‘similar’? Glad you asked…..
Understanding CMAs
The highest listing price isn’t always the best listing price! That may seem counterintuitive, but in any given day in Hawaii, there are countless properties that have been sitting for sale for months on end. If the seller is in no hurry whatsoever and willing to wait, then maybe they’ll get that price someday if the market turns up. But right now in the summer of 2020, even amid the Covid-19 pandemic, homes are taking about 30 days to go into escrow. A home that’s still on market for 180 days is almost assuredly overpriced.
An essential aspect of a good CMA is that the properties compared are those which most closely match a listing in Hawaii. By working with our experienced real estate professionals, you can rely on our word and be assured the numbers are logical and backed by actual data.
Let’s begin by digging into what makes another property contain the right data to be comparable for use in your CMA. This is the ‘apples to apples’ approach we mentioned….
How a CMA Works
Sale Date — the more recent the sale date, the more accurately a sale reflects today’s market and economic environment. When looking at ‘comps’ (the select houses that make up your CMA), try to go back no more than 90 days if you can. This will change from place to place, but if you go back further the sale may reflect different interest rates, economic concerns, etc.
Proximity — How closely is the comp house located to the subject property? Naturally, it would be nice if every comp in the report was in the same tight-knit neighborhood, but that’s unlikely to be the case. However, try to keep your chosen comps in the same area as best as you can. Try to avoid crossing major highways (ex. H1 on Oahu) as that can change the feel (and therefore, market values) quite rapidly. Think about the mauka side of Pearl City vs the makai side, and you’ll know what I mean; the neighborhoods feel very different. Other considerations are crossing school district lines, comparing areas with HOAs vs no HOA, and changes in zoning.
House Features — Try to match key house features like # of bedrooms, # of bathrooms, size of both the house itself and the lot, as well as the year the house was built. If you’re running comps in Waipahu, don’t use a 6-bed 3-bath house to comp out a 3-bed 1-bath house, even if they’re next-door neighbors. However, if you know the value of the extra room, then you could make adjustments accordingly.
You also want to take into account the condition of the house. If the comp is in fully renovated immaculate condition and the subject property is not, then you could still use it as an idea of what the house could sell for if the work was put in, but you couldn’t use it as an apples-to-apples figure.
One caveat to all of this — Oahu and some of the neighboring Hawaiian Islands tend to feature a lot of condo buildings, at least in some cities and towns. This can often make running comps — and figuring out market value — easier. Why? Because many, if not most, if the units are the same! Same bed/bath count, same living sqft size, same parking spaces, same year built (of course), same maintenance fees. The only real differences tend to be the view (ocean vs mountain, for example), floor (30th vs 4th floor can change market value considerably), and the condition.
FYI – we love to buy condos in Hawaii. Ask us for an offer on yours…..
Putting It All Together
Once you’ve put together a reasonably sound list of comparable properties from above, then you need to settle on what you feel is the appropriate market value. Some people will say you can run strict calculations based on average sqft, but this is where it gets into art vs science. Ultimately, the market will determine the actual price, even if a report or calculation states differently. But now, you’re informed, which is more than most people.
As real estate professionals, we are experts at digging into CMA data, we’re on top of current Hawaii real estate market trends, and we’re experienced in determining the right price for the home you are selling or buying. We can put something together very quickly if you’re having a hard time.
If you are considering selling on your own, talk to us about your options. We can help you work on a price and also give you some direct offers for buying your Hawaii home from you directly without the hassle, fees, and waiting times of a traditional agent sale.