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What's the Difference Between a CMA and an Appraisal?

Written by on Thursday, 26 December 2013 9:14 am
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How do you find out the value of your home? There are two ways - a comparative market analysis, or CMA, and a professional appraisal.

The CMA is used to determine current market value so that you can choose the listing price where your home will sell quickly and for the highest amount possible.

Your real estate professional gets the information for the CMA from the multiple listing service, or MLS, where brokers and their agents pool information on listed properties for sale. The MLS also contains sold data, historical trends and property tax roll data.

The CMA includes recently sold homes and homes for sale in your immediate neighborhood that are most similar to your home in appearance, features, and general price range. Establishing a home's fair market value is equally important to buyers and their lenders. When your buyer applies for a loan, the bank will order an appraisal.

Where the bank appraisal differs from a CMA is that it is performed by a licensed appraiser - not a real estate agent. Even though the appraiser is hired by the bank, the appraiser has no vested interest in the transaction.

The appraisal is designed to protect the bank, so that it doesn't loan too much money for a single property. The appraiser visits your home and compares it to other similar homes using square footage, finishes, age, condition, location, and more.

The data is compared to property tax records and recent solds as well as sales trends to determine the arc of prices up or down. Appraisers also use information from the local MLS.

If an appraisal comes in lower than the asking price of the home, the bank will not make the loan, and the seller will likely reduce the price for the buyer.

One thing is certain, no home will sell for more than it's worth in any market. If you price your home based on the information suggested by the CMA, chances are good that the buyer's appraisal will support the sales price.

If you price your home above comparables, it's a sure way to insure your home won't sell.

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  About the author, Blanche Evans

4 comments

  • Comment Link Fred Monday, 30 December 2013 1:36 am posted by Fred

    I appreciate your commments and they are valid. My intention was not to diss the Appraisers 'bricks and mortar/ investment" function but rather show that there is a lot more to what we Estate Agents do for sellers (and buyers) than a CMA. In my area there are 14 Estate Agencies and while our success rate in obtaining a sole Mandate is high, we don't get paid for those Mandated by others.- so services are free- also for those not selling but wanting to know the approximate value of their property. In SA transfers of sales take,on average, 2.5 -3.5 months so we have to wait a long time for our cut! I believe we should be charging for this service up front!

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  • Comment Link James Sunday, 29 December 2013 6:24 pm posted by James

    Also, the writer of this article has some inaccuracies in the very first paragraph. A comparative market analysis (CMA) should NOT be a reliable source for your home or property's value. It should be used a means for a probable price range to put your property on the market. Market Price and market value do not share the same definitions.

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  • Comment Link James Sunday, 29 December 2013 6:18 pm posted by James

    Well, Fred an appraisal is typically done by a disinterested 3rd party whose fee is not tied to the sale of the property. What you are explaining are typical duties of a real estate firm/agent who is typically paid a commission for his/her services. I also don't believe you do this "for free!" as you would get paid a commission at settlement.

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  • Comment Link Fred Johnson Friday, 27 December 2013 8:05 am posted by Fred Johnson

    Sounds great and will cost the potential Seller! In my area in South Africa, Estate Agents perform this function, can obtain size of building from plans and all the other stats necessary including a copy of the deeds to see if the are any restrictions. More importantly, also intimately know what buyers are looking for in homes so style of the home, flow layout, whether its above or below the road, the type of sewerage system all come into the market appraisal. We also do these inspections with 3-10 of our colleagues and discuss the merits and demerits before returning with a price and a recommended asking price.
    We also assist them with home preparation advice, costs, and answer all their questions.Even the contacts to where they wish to move. I don't think your Appraisers are going to do all this,,, for free!

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