Appraisal vs. Market Analysis - Is There a Difference?

What is a Comparative Market Analysis?

A Comparative Market Analysis, or a CMA, is an evaluation of similar recently sold homes (called comparables), that are within an area close to the home intended to be bought or sold.  In the case of farms or large acreage properties, it would be within the school district or a certain radius from the subject home.  A Comparative Market Analysis establishes the current market value of the subject home and are prepared by real estate agents.  It is not the same as an appraisal, which is performed by a licensed appraiser.  

What is an Appraisal?

An appraisal is an estimation of a home's market value done by a licensed appraiser, using comparable recent sales of a home in the neighborhood.  In the case of farms and large acreage properties, it would be within the school district or a certain radius from the home.  Real estate agents CANNOT perform an appraisal.  Appraisals are orderd on behalf of a home Buyer's lender to protect the interests of the lender.  The lender's underwriter will compare the appraisal price to the final sale price of the home to ensure the value of the home is equal to or greater than the loan amount.  If the home appraises lower than the final sale price, the home Buyer may be able to renegotiate a lower price with the Seller.  If the Seller will not lower the price, the Buyer's lender may asl that the Buyer put more money toward their down payement on order to make up the difference.  

What Is Appraised Value?

•          Appraisals provide an objective opinion of value, but it is not an exact science, therefore, appraisals may differ.

•          For buying and selling purposes, appraisals are usually based on market value — what the property could probably be sold for.  Other types of value include insurance value, replacement value, and assessed value for property tax purposes.

•          Appraised value is not a constant number.  Changes in market conditions can dramatically alter appraised value.

•          Appraised value doesn’t take into account special considerations, like the need to sell rapidly.

•          Lenders usually use either the appraised value or the sale price, whichever is less, to determine the amount of the mortgage they will offer.