CMA vs Appraisal
As a listing agent, one of the first things I may complete for a client is a Comparative Market Analysis. This usually gives my clients a great starting point for the discussion on pricing their home. This is often confused with an appraisal and while they are similar they are not the same thing. In this episode I’m going to try and help you through the differences.
COMPARE APPLES TO APPLES
When I present my comparative market analysis to clients, often called a CMA for short, I try to point out where I pulled my numbers. I use recent sales in the area, avoiding active listings, to compare their home to what has actually closed. This generally results in a range of prices where we could anticipate offers and a closed sell of our own.
It is important to always compare apples to apples. Trying to find as many similarities as possible is critical to the accuracy of the CMA. We want to compare homes with similar styles, size and amenities in similar locations and neighborhoods. The closer the similarities, the better our “comps” are, and we can arrive at a better assumption on pricing.
BANKS ARE PLAYING DEFENSE
An appraisal is what a bank has done to make sure the home they are loaning money on, is worth the amount of the loan. The bank wants to protect their investment, and insure that if the home goes into foreclosure, they can sell it for the amount of the loan to recoup their monies. The appraiser, who is licensed by the state, is using the same basic criteria that we did for the CMA, but is looking a little deeper at the details.
Some neighborhoods have a higher number of sales, so finding homes in that area is easier…and its even easier if the homes have repeated or similar floor plans. Those would be great comps, but thats not always the case. Agents doing CMA and appraisers have a lot of variables to sort though.
A MOVING TARGET
In both instances, pricing is difficult. We are trying to hit a moving target and estimate where the market is going. In 2021 and 2022 that trajectory was up, so agents would use that to price a home…They may have gone a little lower to speed things up, or priced a little higher, in hopes of reaping the benefits of a white hot market for their client. Todays market is very different, and I think its safe to say, we have no idea of positively predicting what is waiting ahead.
If you like the videos please check out chriswhitehurst.com or my YouTube channel. There’s similar content all over both of those platforms. I can also be found on most social media platforms where the content is always fresh and releveant to today todays market. Until next time….
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