13.2 Comparative Market Analysis (CMA) and Pricing

13.2 Comparative Market Analysis (CMA) and Pricing

Pricing is where sellers judge a broker's competence. Over-pricing wastes the marketing period; under-pricing breaches the duty of care to the seller. A comparative market analysis (CMA) gives an evidence-based price range.

1. Data sources

2. Choosing comparables

Good comparables match the subject property on:

1. Location: same building, then same sub-community.
2. Type and layout: apartment vs. villa; bedrooms; built-up area.
3. View and floor: sea, park or road view; high vs. low floor.
4. Condition: original, upgraded or needing work.
5. Time: recent sales (for example the last three to six months); older sales need a time adjustment in a moving market.
6. Tenure and status: ready vs. off-plan (Oqood); vacant vs. tenanted.

Exclude outliers such as family transfers or distressed sales unless the subject is in the same situation.

3. Adjusting and calculating

Work in AED per square foot so units of different sizes can be compared:

$$\text{Price per sq ft} = \frac{\text{Sale price}}{\text{Built-up area (sq ft)}}$$

Then adjust each comparable for differences from the subject (if the comparable is better, adjust its rate down; if worse, adjust up).

Worked example

Subject: a 2-bedroom apartment of 1,120 sq ft, mid-floor, original condition, partial view.

• Average adjusted rate: (1,500.00 + 1,501.36 + 1,455.00) ÷ 3 ≈ AED 1,485 per sq ft.
• Indicated value: 1,485 × 1,120 ≈ AED 1,663,700.
• Range from the adjusted comparables: about AED 1.63 million to AED 1.68 million.

4. From CMA to pricing strategy

• Recommended range: present the evidence and a range, not a single "promise" figure.
• List price: a modest margin above the expected sale price allows negotiation, but a price far above the range attracts few viewings.
• Review point: agree to review price after a set number of weeks or viewings without offers.
• Buyers: the same CMA helps a buyer's broker advise on a fair offer, as part of the duty to give the client the information needed to decide (Article 17 of Bylaw No. 85 of 2006).

5. Pricing rentals

The same method works for leases: use registered Ejari-based rents and the RERA rental index for the building and unit type, convert to AED per sq ft per year, and adjust for furnishing, view and condition. For a renewal, the landlord's increase is limited by Decree No. 43 of 2013 whatever the CMA shows; the CMA helps only with new lettings and negotiations within the cap.

For investors, check the price against yield: a CMA price of AED 1,663,700 and an expected rent of AED 110,000 imply a gross yield of about 6.6%, which can be compared with similar buildings.

6. Presenting the CMA

1. Show the comparables with dates, sizes and registered prices.
2. Explain each adjustment in plain words.
3. Give a range and a recommended list price, with the expected time to sell.
4. Note risks: tenancy, service charges, required repairs, mortgage valuation.
5. Keep a copy in the client file (Article 15 of Bylaw No. 85 of 2006 requires brokers to keep transaction documents).

7. CMA vs. formal valuation

Remember the mortgage effect from Chapter 6: banks lend on the lower of price and the bank's valuation, so a price well above comparable evidence can leave a mortgage buyer short of funds.