What’s the Difference Between a CMA and a Home Appraisal?
A competitive marketing analysis (CMA) is a process your real estate agent will perform in order to get a good idea of an appropriate listing price for your home. A CMA evaluates recently sold homes that are similar to yours (often called comps). Real estate agents will gather this information from the courses like the multiple listing service (MLS) and property administrator records. It’s important to note that the MLS is only available to real estate agents, which is part of what making listing your home FSBO (for sale by owner) so challenging.When doing a competitive marketing analysis, your agent is looking at homes that are similar to yours in size and features. The CMA lists information on properties currently on the market, pending properties, sold properties and expired properties. The CMA will also list a low, median and high price for your home as well as an estimated average number of days on the market. The CMA isn’t an exact science but it provides a value range to establish a list price.
The appraisal is a bank process that occurs once a buyer applies for a loan to purchase your home. After the buyer submits an offer and requests a loan, the bank arranges for a licensed appraiser to visit your home. The appraisal is used to value collateral in a real estate transaction. Appraisals are required for most federally related transactions above $250,000.
For more information on the real estate valuation and the process, click on the links below for our answers to the most frequently asked questions.
Understanding Real Estate Appraisals
Q. Who orders the appraisal?
A. The mortgage lender orders the appraisal and is the appraiser’s client. Sometimes a lender will use an appraisal management company (AMC) to manage the appraisal process. An AMC will order an appraisal on behalf of the lender. Some lenders order the appraisal directly from an appraiser.
Why does the lender give the appraiser a copy of the sales contract?
A. The Government Sponsored Enterprises (GSEs) require that an appraiser analyze the sales contract and the appraiser must confirm analysis of the contract on the appraisal report. The appraiser looks at the terms of the sales contract and compares them with what is typical in the market. The sales
contract has information such as the interest rate, the down payment amount, seller contributions or other personal property items that might be included in the sale. The appraiser must also verify if the property seller is the owner of public record.
Q. Does a buyer’s choice of financing impact the appraisal process
A. Yes. The appraiser must comply with the Uniform Standards of Professional Appraisal Practice (USPAP) and appraisal regulations, but also follow any additional requirements from the mortgage lender, Freddie Mac, Fannie Mae, FHA, USDA and VA. For instance, some loans will require the property
to meet certain minimum property requirements.
Q. What does the appraisal's work involve?
A. Inspect the property, if needed
Research various resources for information about the subject and market area, including county and municipal records, MLS records, and other data services
Review recent sales and listings of comparable properties, in much the same way that agents do when they prepare CMAs
Use an appropriate approach, or combination of approaches, to develop an opinion of the property value. There are three main approaches:
→ Sales comparison approach: This approach uses recent sales of comparable properties. Characteristics such as the living area of the home, land area, style, age, quality of construction, number of bedrooms and bathrooms, and presence or absence of a garage are analyzed and compared. This is often the primary approach used in appraising a residential property.
→ Cost approach: This approach reflects the appraiser’s opinion of the current cost to construct the existing house, minus any estimated depreciation, plus the value of the land. This approach is more relevant for newer homes or home features that have little or no depreciation.
→ Income approach: This approach generally is used on properties that have some income-generating potential. In a residential context, this would include properties that have two, three, or four living units. It typically is not used for one-unit homes in neighborhoods where residences are primarily owner-occupied.
Prepare an appraisal report that contains sufficient information for the intended users to understand and use it.
What information should a home owner have available for the appraiser?
→ HOA documents
→ Floor plans
→ Neighborhood details
→ Recent similar-quality comparables
→ Detailed lists and dates of upgrades, remodels, and costs
→ Energy-efficient features
→ Multiple offers on the property at time of sale
Q. Will the purchaser receive a copy of the appraisal?
A. Yes. The Equal Credit Opportunity Act (ECOA) requires creditors to automatically send a free copy of home appraisals and all other written valuations on the property after they are completed, regardless of whether credit is extended, denied, incomplete, or withdrawn.
Q. Who do I talk to if I feel the appraisal value is inaccurate in any way?
A. Once an appraisal assignment is completed and sent to the appraiser’s client, typically the lender, an appraiser may not discuss the results of the report to anyone but the client who ordered the appraisal, or parties designated by the client. In order to ask an appraiser to correct errors in the appraisal report or consider additional information, you must contact the appraiser’s client in writing.
How do I interpret the appraisal report?
How to Read an Appraisal Report
There is no single, universal form used for appraisals, but Fannie Mae and Freddie Mac (the Federal Home Loan Mortgage Corporation) have developed residential appraisal report forms that many appraisers and AMCs use as is or with minor variations. Regardless of the format or style, appraisal reports consistently include certain information.
A credible appraisal contains certain essential elements. You should be able to locate all of the following in the appraisal report:
→ Clear identification of the property appraised
→ Description of the appraiser’s scope of work
→ The identity of the client and any other intended users of the report
→ The intended use of the report
→ The definition of value used
→ The effective date of the value
→ Relevant characteristics of the subject (Relevant characteristics is how appraisers typically refer to the concept of market expectations—what a typical buyer would expect to find for the property.)
→ Identification of the method(s) used to value the property
→ Presentation of the method(s) used to value the property
→ Description of the neighborhood and market conditions for the neighborhood
→ The appraiser’s final value opinion of the property
Tony Clark Realtors believes every client should feel confident when buying and selling a home. We are here to be your trusted adviser. Since 1976, we are the Owensboro Kentucky market expert.
Tony Clark Realtors | 2934 Frederica Street Owensboro, Kentucky | (270) 683-SOLD