11/05/2019
Comparative Market Analysis vs. Appraisal
The most common methods for estimating a home’s value are CMAs and appraisals. Before you dive into a CMA, it’s worth noting how each method differs.
A CMA is an examination of the prices at which similar, nearby homes recently sold. By looking only at sold homes – as opposed to homes that are currently on the market – CMAs provide a factual evaluation of market values in your neighborhood. These are often done by a real estate agent to establish a listing price for a home seller, or for a potential buyer to help guide an offer amount. Most CMA reports do not mention the home in question. Instead, the focus is on what is happening in the local market. It details the value of similar homes in terms of age, condition, size and several other traits. By analyzing this data, you can arrive at the fair market value of your own home.
An appraisal involves analyzing many of the same traits. However, it can only be done by a licensed real estate appraiser who follows guidelines established by the Federal Housing Finance Agency. Appraisals are usually requested by mortgage lenders before they issue a home loan. If an appraisal comes in much lower than the asking price, a lender may not make a loan unless the seller adjusts the price.
Simply put, a CMA is typically done to set an asking price or decide on an offer amount. An appraisal is typically done to determine if a home is worth an agreed upon sale price.
