CMA vs. Appraisal


No two homes are identical, which is why choosing a sales price or offer price for a home can be challenging. A Comparable Market Analysis, or CMA, can be useful in targeting a competitive yet fair sales price. A home Appraisal is necessary in not only establishing a fair purchase price but also in protecting the lender and buyer. Let's take a closer look at these two functions:

What is a CMA?
The CMA is a side-by-side comparison of homes for sale and homes that have recently sold in the same neighborhood and price range. This information is further sorted by data fields such as single-family or condo, number of bedrooms, number of baths, zip codes, and many other factors. Its purpose is to show fair market value, based on what other buyers and sellers have determined through past sales, pending sales and homes recently put on the market. Values are typically compared within most recent 3-month activity, but can go as far back as 6 months to a year.

How is the CMA created?
CMAs are generated by a computer program supplied by your real estate agent’s multiple listing service (MLS). The MLS is available to licensed members only, including brokers, salespeople, and appraisers, who pay dues to gain access to the service’s public and proprietary data, including tax roll information, sold transactions, and listings input by all cooperating MLS members. Listing agents generate CMAs for their sellers, and buyer’s agents create them for their buyers so both sides know what current market conditions are for the homes they’re interested in comparing.

How accurate are CMAs?
The CMA is a here-and-now snapshot of the market, based on the most recent data available, but it can instantly be rendered obsolete by a new listing, or a change of status in a home with the same criteria. Why? The market is constantly changing – new listings, pending sales, closed sales, price reductions, and expired listings. CMAs can vary widely, depending on the knowledge and skill of the person inputting the search parameters to the software as well as the number and type of data fields that are chosen. That means some features may not be included.

As informative as the CMA is, it should only be used as a tool and should not substitute for your real estate professional’s knowledge and advice.

What is an Appraisal?
An appraisal is an unbiased *opinion* of value that is completed by a professional certified or licensed appraiser who physically visits and inspects the size, condition, function and quality of the home.  An appraisal is often used in facilitating real estate transactions to establish purchase price or home value as loan collateral. By law, the appraisal must be done by a third party who has no interest in the outcome of the appraisal.

How does an Appraisal work?
Appraisals can vary by state, but they primarily involve:

1. Inspection: Appraiser physically inspects property to determine fair market value.
2. Comparables: Appraiser researches similar homes in your area and compares recent sales to determine market value.
3. Final Appraisal Report: Appraiser, using data from the inspection and comparables research, issues a final appraisal report.

Why do I need an Appraisal?
A real estate appraisal helps establish a property's market value -- the likely sales price it would bring if offered in an open and competitive real estate market. An appraisal protects both the lender and buyer so they they don't overpay for a home; however, it really is done for the benefit of the bank/lender.

Until the buyer has some years in the home and built up equity, the lender is ultimately the one on the hook for the purchase price. An appraisal provides worth of the home to ensure it can be resold at an amount that will cover the loan if the buyer defaults.

Banks and lenders typically require buyers to use appraisers approved by the lender, but they may be allowed to choose their own.  If so, select someone who is certified or licensed, experienced, familiar with your area, and who has a clean employment background,