Home Appraisal vs CMA
Two of the most effective processes used when pricing a home to sell are a Comparative Market Analysis, also referred to as a CMA and a real estate appraisal. So what exactly are the two and how do they differ when determining property value?
Comparative Market Analysis (CMA): A comprehensive list of homes that are comparable to the subject property prepared from data found on the multiple listing service (MLS). Typically a CMA is prepared by a local real estate agent who evaluates your home and the house market by identifying comparable properties that have sold and are currently on the market. Active listings are homes that would be your direct competition when selling. Common names for this type of report also include Competitive Market Analysis and Highest Price Analysis.
What is an appraisal?: A formal written appraisal is conducted by a licensed real estate appraiser. A property appraiser can be hired from a bank or from an appraisal company directly. This type of home value evaluation can be useful if your property is unique, you have recently completed a great deal of renovations or sales in your area have been scarce. An appraisal must be conducted on the property when a buyer is purchasing the home with a mortgage.
How does a CMA differ from a formal written appraisal? The major difference is that an appraisal will only be based on past sales and rarely take current active listings into consideration when pricing. CMA’s are offered by real estate agents at no charge. A CMA is slightly more subjective where an appraisal is objective.
Appraisers are governed by the Home Valuation Code of Conduct (HVCC). This means that strict guidelines are followed when conducting an appraisal. When an appraisal is conducted a value is set on specific features/amenities of the home. Although the amounts allocated to each feature are not standardized which features evaluated are. For example, when comparing a 2 bedroom home to a 3 bedroom home an appraiser may state that the extra bedroom is worth an increase in value of $10,000 when another may say it is worth an increase in value of $20,000.
A market analysis will also evaluate the temperature of the real estate market and housing statistics. Monitoring the number of days a home is one the market and how many price adjustments the home had during the listing period is not accounted for in an appraisal; however in a CMA this may help guide on how to value a property.
