by Susan Di Donato 
As a licensed real estate professional, I have been evaluating New Jersey home prices on a daily basis for over 22 years. I’m often called upon to provide my New Jersey clients with home valuations when they are selling or buying. Most people know that it is important to get an appraisal or Comparative Market Analysis (CMA) before selling or buying. But let’s look at why knowing the value of comparable homes, or the “Comps”, is important.
If you are a seller:
It is very difficult to convince some sellers in advance, but there is nothing worse than pricing your house too high and then constantly lowering your price and chasing the market down. Buyers today are very educated and know how to spot a seller in distress. That is exactly what the buyer sees when your listed price history shows downward movement or a large number of days on the market.
This is true in a seller’s or a buyer’s market.
In a seller’s market – If your home is overpriced, highly qualified and ready buyers may not even know your home is for sale because their search criteria are set at a price range slightly lower than yours. If your home has been sitting on the market longer than normal while other similar houses are selling quickly, buyers consider this a big red warning signal. Buyers may decide that your house has some kind of problem and is not worth looking at because nobody wants it. There is some buyer psychology at play here as buyer’s generally do not want what others have deemed unworthy. Conversely, buyers are attracted to what they believe is attractive to others.
In a buyer’s market – When prices are trending downward, I’ve seen sellers reduce their price multiple times over an extended period only to get significantly less than if they had priced the house correctly in the first place (see the example below). You will only get one chance to price your house correctly when it first comes on the market.
If you are a buyer:
There are many reasons why a CMA is essential for making offers on houses. Of course, the main reason is to avoid overpaying. But there is more to it than that! Buyers in a highly competitive atmosphere also want to avoid under-offering. In our current seller’s market, where prices are trending sharply higher, and inventory is at an all time low, you need to be able to recognize undervalued homes and be confident that even though your offer is much higher than the asking price, the value is consistent with similar properties based on the latest market evaluations.
Real Examples:
Seller Example – Fred wants to sell his house and demands to list it at $775,000, even though the CMA shows comparable homes are selling fairly quickly at $700,000. After one month of not selling, Fred decides to reduce the price to $750,000. But now the current CMA values his house at $690,000. The market appears to be trending lower. Fred still isn’t convinced, but after another month he decides to lower the price to $725,000. Now the market has moved even lower and the current CMA puts the value of his house at $675,000. And the cycle continues until Fred has to sell quickly and settles on $650,000, or $50,000 less than he would have received a few months prior.
Buyer Example – Alice has been outbid on several condo offers over the past year, and is frustrated because she has been chasing the market up as prices increased across Bergen County. Her last offer was $30,000 over the asking price and was still very low compared to her competition. Alice believes that her offer of $30,000 over the asking price should have been enough, but in fact, that condo sold for $60,000 over asking price. Alice is now wondering if she can buy a condo in her preferred towns which are far less affordable now than they were when she started shopping one year ago.
There is a better way!
Working with an experienced local Realtor who understands current market trends combined with up to date CMA data will help you develop and execute a successful strategy when buying or selling.
If you are a seller, you want the market to chase you. Proper pricing combined with proven marketing strategies will increase interest in your home which translates into more offers. When buyers know there are more offers, they tend to offer more to win the property. We have seen bidding wars ending in sellers receiving $60,000, $80,000 and even $100,000+ over asking price as new highs are created in our markets.
If you are a buyer, you want to stay ahead of your competition and ahead of market trends to secure your offer at the best possible price. It pays to work with an experienced Realtor to spot underpriced properties in a rising market and overpriced properties in a falling market. You want to be confident in your offer, even if it goes significantly above or below the asking price.
Working with an experienced Realtor and having current CMA data is the answer!
Let me put my 22 years of experience to work for you!
What is your New Jersey home worth?
What is a CMA?
A Comparative Market Analysis, or CMA, is a report I prepare as a licensed real estate agent to figure out the value of a property. I look at similar houses in your area that have recently sold and use factors such as size, age, style, features, and condition to determine the value of your house. Additionally, I can even check the contracted prices of houses that are almost sold but haven’t closed yet to gain a better idea of its current market value.