Your real estate agent will create during the initial phases of the marketing process of your home for sale a so called "Comprehensive Market Analysis"... also called a "CMA" for short. Agents representing potential buyers may also create their own CMA's for their clients to guide them in making their offers.
Eventually, when a buyer and seller agree on a price and the buyer applies for a mortgage the lender will order an appraisal by a licensed real estate appraiser to make sure they lend nothing in excess of the current value of the home.
But the CMA and the appraisal of your home are not the same thing at all! While both CMA and appraisal help to establish your home's market value, their purposes are not the same.
The CMA is a marketing and sales tool assisting you in determining a sensible asking price for the home you want to sell. The properties typically used in the CMA are nearby homes with similar features like yours that have recently sold.
It is strictly a decison making tool... for you, the seller, to set your asking price... and for potential buyers to decide how much to offer.
Appraisals, on the other hand, are all about risk assessment for lenders and their customers. Unlike an agent's CMA, a bank appraisal is a professional determination of a home's current value. It must be performed by a licensed appraiser under guidelines established by the Federal Housing Finance Agency, which in turn regulates federal housing loan guarantors such as the FHA and VA, as well as Fannie Mae and Freddie Mac.
In addition, while appraisers use the very same market research data as the agents did, they must also adhere to underwriting guidelines from the bank to minimize risk to the bank and to the buyer/borrower.
Despite much stricter lending and appraisal standards, most buyer loan applications go through to closing... mostly because real estate agents are preparing CMAs that are much better tuned to the new lending standards as well as the prevailing market conditions.
Comments(2)