Appraisals vs. Comparative Market Analysis

What’s the Difference between a Comparative Market Analysis (CMA) and an Appraisal?

When selling or purchasing a home, our clients often ask us about our analysis of home prices and appraisals. Both are very important factors in determining the value of a home…so what’s the difference?

As your real estate experts, we at Capital Estate Group will prepare a CMA for you on a home you’re looking to buy or sell, analyzing the market – including other homes which sold recently and are similar (noting how they are different), what these homes recently sold for, what credits the seller offered the buyer, how long a home was on the market, and more. We use this analysis to assist you in understanding a home’s price in the marketplace. This is essential for building an effective strategy specifically for you, whether you’re pricing your home for sale or preparing to make an offer on a home.

So when does an appraisal factor in, do I need it and why?

If you plan to purchase a home and finance the purchase, the answer, in short, is yes, you will need an appraisal. An appraisal is performed by a licensed appraiser, who prepares a opinion of value for the home based on its features and the current housing market. While a lender will require an appraisal to protect its interest, an appraisal can also provide a buyer important information on whether the appraiser believes the home has a market value at least as high as the contract sales price.

With a home purchase, appraisals are ordered by a lender from a third party licensed appraiser. The appraiser will visit the property and compare the property to other similar homes using square footage, finishes, age, condition, locations, property tax records, and recent sales. Again, the lender uses the information to confirm that a buyer is purchasing a home at or below market value, which allows the lender to justify the loan amount.

In our experience, appraisers will often determine value to be the contract sales price, even if actual market value may be higher. Why? As one appraiser once shared with us, “we’re not motivated to appraise a property higher than the contract price, even if the value is there.” Again, the bank’s appraisal is meant to justify the loan amount and not to gauge what a buyer might pay for a home.

So, when it comes to understanding what a buyer might pay for your home, or what you should pay for a home, you can look to us to provide you a comprehensive analysis – a CMA – to help you develop the best possible strategy. We typically sell our homes for over 2% more and 4x faster than competing agents, and we often help our buyers buy homes under market price. Our CMAs allow you to understand price and allow us to prepare winning strategies for you.