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Many people who are going to buy or sell a home often times hear their realtor refer to a thing called comps. Comps, also known as comparative market analysis (CMA), are an important tool when going into a real estate transaction. They basically allow you to estimate the fair market value of a home based on a number of different criteria. It is imperative that your real estate agent provide you this information in order for you to properly negotiate a contract.

As a buyer, a CMA can give you a general view of the market conditions for the particular neighborhood in which you want to purchase a home. It allows you to know how big of a house you can afford as well as what upgrades you may be able to attain in that area. Knowing the fair market value will allow you to fine tune your decision when going to make your offer. This is especially useful if time is of a concern. If you need to get into a home sooner rather than later, an accurate CMA will allow you to make a bid on a home that will beat out other offers. If you are in no particular rush to get into a house, you can set your offers at 5-10% below fair market value and try to get yourself a good deal.

When going to sell your home, an accurate CMA is a must. Often times a realtor is hesitant to provide and accurate CMA because it may be below what the seller expects the home to sell for. In this case, you can run into a problem because the house will be overpriced and will attract few, if any, buyers. The market decides fair market value and you can use an accurate comp to adjust the selling price based on your time constraints. If you need to sell your home quickly, you can set your selling price right at market value and if you don't, you can set it at a suitable price above market value and wait to see what happens.

There are several factors that go into a CMA, and the more detailed you get, the more precise you can be on the home's fair market value. The most general way of figuring a CMA is to compare similar homes of equal square footage, in the same neighborhood, that have sold in the last six months. To get a more detailed picture you would look at things like upgrades, lot size, and whether the home backs up to a busy street. If you are a seller, don't be afraid to look at the competition. Have your realtor take you to see other similar homes in your neighborhood because it can sometimes be a good dose of reality.

There are many important things to know when going to buy or sell a home and a CMA is one of them. An accurate comp will help a buyer come up with a suitable offer when the right time comes to buy a home. It will also help a seller decide how much time they are willing to have their house on the market and set the sales price accordingly. When choosing a good real estate agent, make sure that they mention CMA's because you will know what they are talking about and how accurate comps are important to you.