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CMA (Comparable Market Analysis) Versus Appraisal

March 7, 2019 by sthompson Leave a Comment

Dear Sue,

My home has been on and off the market for the last year. I am ready to get it back on.  I talked to a REALTOR® that I really like. She suggested that I hire an appraiser to determine the value of my home. She suggested it because I told her that I have more money in my home than her market analysis shows that it is worth.  I told her that I had to get my money out of my property. That is when she suggested that I hire an appraiser. She said it would cost me $300-400.

First of all, isn’t a market analysis the same as an appraisal? If it is, why should I pay for an appraisal?  Second of all, how can a home’s value be less than what it would cost me to replace it? In other words how could it cost less than what I have in it?  Please respond ASAP. I need to make a decision.

Sincerely,
Disappointed Dan

 

Dear Dan,

I understand your confusion and your frustration. Let me begin by explaining the difference between a CMA (Comparable Market Analysis) and an Appraisal.

A CMA is a detailed report that compares your property to similar properties. Location, age, condition, size and amenities are some of the factors considered. The CMA compares active, available properties, pending properties, sold properties and properties that are expired. The CMA is prepared by a professional REALTOR® with market knowledge.

It is not an exact science and is typically presented in a price range; low price, high price and median. The CMA also shows typical days on market, or the average time it will take a property to sell in various price ranges.

The market data is obtained from the association of REALTORs® as well as the County Recorder’s office. A market analysis can vary between agents. The variation depends on the properties they believe to be comparable.

An appraisal is an estimate of value prepared by a professional that is certified by a licensing board that requires 2,000-3,000 hours of experience and 90-180 hours of education. The government regulates real property appraisers. Appraisals may also vary from appraiser to appraiser, as with the CMA, on the properties they choose to evaluate.

In any event, both the appraiser and the REALTOR® are required to do a market evaluation, not a cost evaluation. The “cost” is the amount of money that one has put into the property and the “value” is what a qualified buyer is willing to pay and what a willing seller will take.

Your REALTOR® may have requested that you get an appraisal in order for you to get a second opinion (“opinion” being the operative word here.)

A market evaluation is no more than an “opinion” of value. A qualified buyer establishes the actual value by what he or she is willing to pay. In down markets it could be less than what you are asking and in up markets it can actually be more than you are asking.

Understanding the difference between market value and cost is critical when pricing your home for the current market.

Getting a second or even third opinion of market value is a matter of good home dollars and sense.

 

 

Filed Under: Appraisals Tagged With: appraisal, CMA, comparable market analysis, property value

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