A CMA (comparative market analysis) is a tool your broker uses to estimate and determine the value of a home for use in a listing price or offer when buying or selling a home. Your broker should always offer this service free of charge and without obligation. In other words, the CMA is a way to gauge how much you should sell a house for, or how much you should buy your house for.
Your broker creates a CMA with recent sales data and their knowledge of the local market. They will compare your home with homes that are most like yours in your neighborhood, or similar neighborhoods nearby. A broker can use comparable homes of the same type (single-family, multi-family, commercial, etc.), in similar condition inside and out, with the same or close to the same number of units and land/living area.
The following are things your broker will consider when creating your CMA:
- Comparable properties that sold in the last 3-6 Months.
- Properties that are currently listed in the Multiple Listing Service (MLS)
- How long similar properties have been on the market
- Property listings that have expired or have not sold
- Location (such as corner lot, school district, street traffic, proximity to hi-ways etc.)
- Other methods depending on the type of subject property and/or the needs of the client.
OK - then how is a CMA different from a real estate appraisal?
A real estate appraisal is done by a licensed real estate appraiser and is most often used by lenders when issuing mortgages for refinancing or buying/selling a home. Appraisals, although, can also used for any other reason a determination of value is needed or wanted.
An appraiser’s job is to give an unbiased opinion of properties value. The appraiser uses techniques similar to your broker but must also follow strict licensing and industry guidelines as well as follow the Uniform Standards of Professional Appraisal Practices (USAP). You can find more about USAP here.
Whats the bottom line on CMA's?
Simply stated, a CMA is your broker’s attempt to institute an opinion of value, with the goal of selling your property for the most money possible. On the other hand, a CMA can also be use by a buyer’s agent, to gauge if the offer is a good value for the buyer.
An appraisal report is a licensed appraiser’s view of fair market value and whether or not the property is worth the price you are trying to buy or sell it for. Another thing to consider is that if your the purchaser of a home, the lender will require appraisal before any type of financing is approved.