January 17th, 2017 8:47 AM by Christopher Lear
What is a comparative market analysis?
A CMA is an evaluation of recently sold homes that are within the area or location of the home that may be bought or sold. It’s usually performed by a real estate agent who has access to homes listed for sale or homes that have sold through their local MLS (Multiple Listing Service). It is not an appraisal.
What is an appraisal?
It is an estimate of the home’s market value by a licensed appraiser. A licensed appraiser has hundreds of hours of education training and has to serve an apprenticeship in order to become licensed. Real estate agents cannot perform an appraisal.
Appraisers use recent sales of homes that have sold in a certain radius around the home they are appraising. Appraisals are required by a lender to make sure that the home is worth more than the dollar amount of the mortgage loan.
If you want to purchase a home and it appraises for less than the sales price, the seller may lower the sales price or you have the option to increase your down payment, depending upon the lender requirements. The seller also has the option to cancel the deal — which means you may have to look for another home to buy.
If you are refinancing, an appraisal is almost always required too. If the value is less than your mortgage amount, you can cancel your refinance or put additional down to lower your original loan amount. Again, the lender will advise you of the dollar amount needed.
Appraisals are not an exact science — that’s why they may differ.
Changes in the market conditions (like a large company in the area closing their doors) can dramatically affect property values.
And, it doesn’t take into account things like “pricing it below market” in order to sell quickly.
The CMA will give you a “good” idea of the value of homes, but an appraisal is the document needed by lenders to ensure that there is adequate collateral for the mortgage loan.