Comparables, often referred to as comps, are recently sold or leased properties used to estimate the value of a subject property. A Comparative Market Analysis, or CMA, is a structured evaluation that uses these comparables to assess current market value.
CMAs are widely used by brokers, investors, and lenders as a pricing reference rather than a definitive valuation.
Why Comparables Are Used
Real estate does not trade on centralized exchanges.
Because each property is unique, market participants rely on comparable transactions to infer value. Comparables provide a market grounded reference point based on what buyers and tenants have recently paid for similar assets.
CMAs exist to organize this information into a usable framework.
How a CMA Is Constructed
A CMA typically analyzes properties with similar location, size, condition, age, and use. Adjustments are made for differences such as renovations, amenities, or timing of sale.
The quality of a CMA depends heavily on the relevance of the selected comparables and the judgment applied in making adjustments.
Common Uses of CMAs
CMAs are commonly used to price properties for sale, evaluate acquisition opportunities, support financing discussions, and inform negotiation strategies.
They are particularly useful in active markets where recent transactions provide meaningful signals.
Limitations of Comparables
Comparables are inherently backward looking.
They reflect past transactions rather than future performance. In changing markets, relying too heavily on comps can obscure shifts in demand, financing conditions, or operating costs.
In development and transitional assets, suitable comparables may be limited or nonexistent.
Institutional Perspective on CMAs
Institutional investors use CMAs as one input among many.
They are often supplemented with income based valuation models, replacement cost analysis, and scenario testing. For assets undergoing transformation, value is driven by execution over time rather than static market snapshots.
CMAs provide context, not conclusions.
Final Thought
Comparables and CMAs are useful tools, but not valuation strategies.
They help frame market expectations, but disciplined investing requires deeper analysis of income, risk, and long term value creation.
