Module 4 📈

Market Analysis
& Pricing

Understand how to read the market, evaluate properties using data, and make informed pricing decisions. From CMA basics to cap rates — the numbers behind every transaction.

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What Is a CMA?

A CMA (Comparative Market Analysis) is a professional estimate of a property's value based on recent sales of similar nearby homes. Agents use it — not appraisers — and it's the foundation of every listing price recommendation.

The 3 Rules of Good Comps

  • Within 1 mile of the subject property (same neighborhood dynamics)
  • Sold in the last 3–6 months (stale data leads to bad pricing)
  • Similar size, beds & baths (apples-to-apples comparisons only)

How Agents Use CMAs

  • To recommend listing prices to sellers — setting the right price from day one
  • To advise buyers on offer amounts — know if you're overpaying before you bid

Price Per Square Foot

Formula: Sale Price ÷ Total Sq Ft = $/sqft
This normalizing metric lets you compare homes of different sizes side by side. A 1,500 sqft home at $300K and a 2,000 sqft home at $380K are very different deals — $/sqft tells the real story.

Adjustments

When a comp has a feature the subject property lacks (or vice versa), you adjust. Common adjustments:

  • Pool: subtract $10K–$30K from a comp that has one if your subject doesn't
  • Extra bedroom: +$10K–$20K
  • Renovated kitchen: +$15K–$30K
Why This Matters at Title X: As a TC or Client Coordinator, you'll see CMA reports in every transaction file. Understanding them helps you catch errors and ask smarter questions — like "why did they ignore that distressed sale as a comp?"

Months of Inventory

Formula: Active Listings ÷ Homes Sold Per Month = Months of Inventory
This measures how long it would take to sell all active listings at the current pace — the single best gauge of market conditions.

Reading the Market

  • Seller's Market (< 4 months): Multiple offers, homes sell over asking, fast closings, limited negotiating room for buyers
  • Balanced Market (4–6 months): Fair negotiation on both sides, reasonable timelines
  • Buyer's Market (> 6 months): More negotiating power, price reductions common, slower pace, motivated sellers

How to Spot Which Market You're In

  • DOM (Days on Market): Low DOM = competitive market, high DOM = buyer has leverage
  • List-to-Sale Ratio: Homes consistently selling above asking = seller's market
  • Months of Inventory: The most reliable single data point
Why This Matters: Knowing the market type immediately shapes your advice. In a seller's market, buyers need to move fast and come in strong. In a buyer's market, there's room to negotiate on price, repairs, and closing costs.

What Is DOM?

Days on Market (DOM) is the number of days a property has been listed for sale — a critical signal about pricing, condition, and demand.

What DOM Signals

  • High DOM (30+ days): Can signal overpricing, condition issues, or poor marketing. Creates "stigma" — buyers start wondering "what's wrong with it?"
  • Low DOM / sold in first weekend: The price was right or even underpriced; hot demand in that submarket

Cumulative DOM

Some sellers pull a listing and relist it to reset the DOM counter. Cumulative DOM (CDOM) counts total days even across multiple listing periods — closing the loophole. Smart buyers and agents always check both.

The First-Week Rule

The first 7 days get 60–70% of total online views. If you miss that window with the wrong price, you've lost your most motivated buyers. Price right from day one — a 2–3% price drop later won't recapture that initial traffic spike.
Why This Matters: As a TC, you track listing dates in the transaction file. As a Client Coordinator, you can set seller expectations early: "Every 30 days on market typically means a 1–2% price reduction to attract buyers back."

Cap Rate Formula

Cap Rate = (Net Operating Income ÷ Purchase Price) × 100
NOI = Annual Rent Income − Operating Expenses (taxes, insurance, maintenance, property management)

Worked Example

  • Annual rent income: $24,000
  • Annual operating expenses: $8,000
  • NOI: $24,000 − $8,000 = $16,000
  • Purchase price: $200,000
  • Cap Rate: $16,000 ÷ $200,000 × 100 = 8%

Interpreting Cap Rates

  • Higher cap rate = higher returns, but usually higher risk (older building, tougher neighborhood, higher management burden)
  • Residential typical: 4–8%
  • Commercial typical: 5–10%
  • A very low cap rate (2–3%) often means the asset is in a premium location with growth expectations baked in

Cash-on-Cash Return

Measures return on actual cash invested (your down payment), not the total purchase price. More relevant for leveraged purchases — if you put 20% down on a $200K property, your cash invested is $40K. Cash-on-cash = Annual Pre-Tax Cash Flow ÷ $40,000.

Why This Matters: Title X handles commercial and investment properties too. When a client says "I'm looking at a 6-cap deal," you'll know exactly what that means — and whether it's competitive for that asset class.

CMA Estimator

Enter up to 5 comparable sales to estimate the right listing price.

Address Sale Price ($) Sq Ft Beds Baths
Comp Analysis
Address Sale Price Sq Ft $/Sq Ft
Average $/Sq Ft —
Suggested Listing Range
Low (−5%)
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Mid (Market)
—
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High (+5%)
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