When doing a Cost Management Analysis (CMA), selecting the best comparables is crucial for ensuring the accuracy and reliability of the valuation. The comparables used in a CMA should be as similar as possible to the subject property to provide a fair and accurate assessment of its value. In this article, we will discuss the best comparables to use when conducting a CMA and how to identify them effectively.
The first step in identifying the best comparables is to gather data on similar properties that have recently been sold or are currently on the market. These properties should share common characteristics with the subject property, such as location, size, age, condition, and type. Here are some key factors to consider when selecting comparables:
1. Location: The geographical location of the subject property and comparables should be as close as possible. Properties in the same neighborhood or region are more likely to have similar values due to factors like desirability, infrastructure, and amenities.
2. Size: The size of the property should be comparable, including square footage, lot size, and number of rooms. A property that is significantly larger or smaller than the subject property may not provide an accurate valuation.
3. Age: The age of the property should be similar to the subject property. Older properties may require adjustments for depreciation, while newer properties may have different market values due to technological advancements or changes in construction standards.
4. Condition: The condition of the property should be comparable, as well. A property in better condition may have a higher value, while a property in poor condition may require adjustments for repairs or maintenance.
5. Type: The type of property should be similar, such as residential, commercial, or industrial. Different types of properties have different market values and factors that affect their worth.
Once you have identified a list of potential comparables, the next step is to analyze their sales data. This involves comparing the sales prices of the comparables to the subject property, taking into account any adjustments for differences in size, age, condition, and type. Here are some common methods for analyzing comparables:
1. Direct Comparison: This method involves comparing the sales prices of the comparables directly to the subject property. Adjustments are made for differences in size, age, condition, and type.
2. Cost Approach: This method estimates the value of the subject property by considering the cost of replacing it with a similar property, minus any depreciation.
3. Market Approach: This method uses the sales prices of comparable properties to estimate the value of the subject property.
It is important to note that the best comparables to use when conducting a CMA may vary depending on the specific property and market conditions. In some cases, you may need to use a combination of different methods and adjust the sales prices of the comparables to account for unique factors affecting the subject property.
In conclusion, when doing a CMA, the best comparables to use are those that are as similar as possible to the subject property in terms of location, size, age, condition, and type. By carefully selecting and analyzing these comparables, you can ensure that your valuation is accurate and reliable.
