CMAs vs Appraisals
Establishing a home’s market value is equally important to buyers, sellers, lenders and real estate professionals so that transactions can proceed quickly and efficiently. A real estate professional may prepare a comparative or comprehensive market analysis (CMA) for their sellers to help them choose a listing price. The CMA includes recently sold homes and homes for sale in the seller’s neighborhood that are most similar to the seller’s home in appearance, features, and general price range.
Although the CMA is used to help determine current market value, it does not establish the seller’s home value. The CMA is merely a guide to help the seller learn what’s happening in their local market, so they can better understand where their home fits in term of price ranges, based on location, features and condition. If the buyer is receiving financing through a bank, the bank will order an appraisal. Unlike the CMA, a bank appraisal is a professional determination of a home’s value. It’s performed by a licensed appraiser, using guidelines established by the Federal Housing Finance Agency, which regulates federal housing loan guarantors such as FHA, VA and housing loan purchasers Fannie Mae and Freddie Mac.
An appraisal is a comprehensive look at a home’s location, condition, and eligibility for federal guarantees. They are also members of the MLS, but they also have additional guidelines from the bank to follow that minimize risk to the bank. They may take off value for slow-moving markets, or markets with high rates of foreclosures. If prices are falling, the appraiser takes the number of days a home has been on the market far more conservatively.
When the appraisal is finished, the bank makes the decision to fund the loan, or it may require the seller to fix certain items and show proof that the repairs have been made before letting the loan proceed. Despite stricter lending and appraisal standards, most buyers’ loan applications go through to closing – nearly 85 percent. One reason for that is
that realtors are preparing CMAs that are better tuned to lending standards, for sellers and buyers to better understand not only what the market is doing, but how much lenders are willing to finance.