CMA playbook – here’s what my agent should have done
I recently contacted an agent to view my property and give me his expert opinion on its saleability and, of course, what the magic selling price should be.
All initial contacts went well: We made contact via social media, arranged to meet at the property the next morning and broke contact.
The next morning, I arrived at my one-bedroom sectional title apartment in bustling Honeydew, in the northwest of Johannesburg, and received a phone call that he was outside the complex.
His first error was not downloading and bringing with a simple property report from a company like Lightstone to show him (and me) what the average selling price of property was in the complex, how often property was traded in the development, as well as what features made up the different unit types, their respective sizes and nuances. He even admitted that he did not do this!
His second error was not telling me, or showing me, anything about him as an agent. He did not tell me if he was a full-status agent, or an intern, and his and his agency’s up-to-date Fidelity Fund Certificate – which essentially grants him the ability to operate legally and to collect a commission for his services.
The third mistake was not telling me about himself. It’s a well-known fact that people do business with people they like or respect. Especially in real estate, personality clashes can be the difference between giving and not giving a mandate. I liked him, though, so was prepared to give him my house – on a sole mandate, too.
He explained that he charged 6.5% commission and would prepare a comparative market analysis (or a CMA, if your agent prefers), and email it to me that evening.
The entire meeting was done and dusted in 30 minutes.
That same evening he sent me his CMA. This is where he dropped the ball…big time. His CMA comprised of a Lightstone attachment as well as four links to current for sale listings on Property24. He wrote his price suggestion and reemphasised his commission – 6.5% plus VAT – which was non-negotiable.
What really struck me was the lack of any discernible research, work or insight. Yet the insistence on the commission still stuck.
Anyone who knows me will tell you that I enjoy working with people and do not mind paying fair value for services and products. I was honestly on the precipice of giving the agent my mandate: his CMA, however, was not what I expected.
I contacted the well-known real estate trainer, Paul Davies, briefly explained my scenario and asked him what I should have received. He simply told me to contact one of his mentees about her “comprehensive CMA”. I was simply astounded!
Celest West is an intern property consultant representing the Aura Property Group in the Kempton Park region. I sent her a few questions to help clarify what a CMA is and if what I had received qualified as a CMA – and the fact that most of the correspondence was conducted over email and not in person.
I have chosen to keep this in Q&A format for ease of reference and to help break down the main points I highlighted at the start of the article.
Q What exactly is a comparative market analysis (CMA)?
CMA is the presentation and explanation that is given to the prospective seller which shows him/her how exactly I got to the listing figure using the various sources that I have explained in my presentation when meeting the client.
Q When an agent visits the seller’s home for the first time, prior to securing a mandate, what should a seller expect after the meeting?
I always do a presentation to the potential seller that takes about an hour and a half. I call this my “Who am I? What do I do? and How do I do it?” presentation. The first section shows the seller exactly who I am, who I work for, and my FFC (Fidelity Fund Certificate).
In the second section, I explain exactly how I do the valuation and I explain the entire process of the CMA in detail.
The third section is regarding mandates and what is required.
The last section talks about buyers, pre-qualifications, and the process after an Offer to Purchase is signed.
This presentation currently has about 110 laminated slides in total to SHOW what I can offer while supported by my business, and how I aim to assist them in every way possible. This is a showing business; not a telling business!
Once the presentation is concluded, I will do the valuation and make a separate appointment to come back and present the full CMA.
No agent should just “send” a CMA. This is a presentation to allow understanding of how the agent got to the price; it is not just a thumb-suck.
The CMA should contain examples of various other properties that are currently on the market in the same area, which have similar features and accommodations to the seller’s home, and the prices they are currently on the market for.
This will show the seller the options that buyers have, what else they can get for a similar price compared with the seller’s home, and why they would choose your home and not one of the others? What makes your property stand out?
Also, I include the actual sales prices achieved in the area over the last three to eight years, the demographics, age and bank exposure, so that the seller can see what sold for how much, how the market has changed, and how it has increased/decreased based on various economic factors.
This outlines the target market and what its affordability is. I also produce a graph of the suburb, showing average price, median price and statistical information from the last few years to, again, show the trends and movements in the area to show what can be expected from the current market.
The data should also include properties that have been taken off the market, and the reasons why they were removed, as well as properties that have been on the market for a considerable amount of time.
Q Is a CMA equivalent to a Lightstone report and current listings on Property24?
No! A CMA should be a comprehensive breakdown of current and past property trends, showing the seller what is available, what sales prices were actually reached and how this relates back to his own property.
If you only present current properties that are listed on Property24 the chances are high that most of them are overpriced and the seller will then want to list his property at a similar price, which is not in their best interest; their property might then sit on the market for an extended period of time with little to no result. So in other words, show the seller more information!
Q Does a good agent also send a comprehensive marketing plan with the CMA – they do after all state their commission in this communication?
Once again, “send” should not be an option. The 8-week marketing plan gets discussed during the initial presentation when I first meet with the seller and then again after the mandate is signed. The seller is included in certain market strategies and their involvement is of utmost importance. It is essentially their reasons for buying this property in the first place that can help in marketing it to the next potential buyer.
The professional fee (commission) is mentioned during the signing of the mandate. In all instances, the professional fee is not negotiable.
Q Is the agent required to explain the rationale behind the listing price, and how does this take place (email, telephone or in person)?
Always in person. Whenever you discuss money, it is best to have a face-to-face discussion. You are discussing the price that you have attached to the seller’s most valuable possession and this does deserve a manner of respect. Would you have a sensitive financial discussion with your wife over the phone?
Q Any further comments?
Throughout the series, it would appear as if agents are trying to avoid face-to-face contact with their clients. Emailing a CMA is a rare occurrence, and is not advised for what could be the most important financial decision that a person could be making.
Clearly, they don’t train them like they used to. A “CMA”, like the one I received, is neither a CMA nor worth 6.5% (plus VAT). If you are interviewing an estate agent this weekend to sell your home, do yourself a favour and send them this article first. See how they stack up. If they drop any of these balls, contact us and ask for recommended agents who are worth every cent of their professional fee. We’re happy to help.