CMA vs. Appraisal: What Is a Comparative Market Analysis

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CMA vs. Appraisal: What Is a Comparative Market Analysis (CMA) in Real Estate?

In the real estate world, there are two common methods used to assess property value – the comparative market analysis (CMA) and the home appraisal. While both serve the purpose of evaluating property worth, they are distinct processes with different purposes, methodologies, and intended outcomes. 

With that said, let's dive into the key differences between a CMA and an appraisal.

What is a comparative market analysis (CMA)?

A comparative market analysis (CMA) is a tool used by real estate agents to approximate the value of a property. They can be performed by real estate agents and brokers without an appraiser's license.

The agent or broker compiles information on recently sold homes that are similar to the subject property in terms of size, location, and condition. These similar properties are known as "comparables" or "comps.” They provide a snapshot of the current market conditions and give the agent a basis for suggesting an asking price or making an offer on a home.

It’s important to note that a CMA is not an official property valuation but rather an informal estimate aimed at helping sellers set a competitive listing price or aiding buyers in making a reasonable offer.

What is an appraisal?

Unlike a CMA, an appraisal is an official assessment of a property's value conducted by a licensed appraiser. Appraisals are most commonly required by lenders when a buyer is securing a mortgage to purchase a home. 

The appraisal helps the lender determine whether the property’s value justifies the loan amount requested by the buyer. While a real estate agent typically performs a CMA, an appraisal must be conducted by a licensed professional who follows standardized methods to ensure accuracy and fairness.

An appraiser’s job is to provide an unbiased evaluation of the property’s location, size, condition, and recent market trends. The final appraisal report is a detailed document that includes an in-depth analysis of the property and its surrounding area.

Additionally, homeowners have the option to use Appreeze to obtain a virtual, more convenient, and affordable appraisal. Unlike traditional appraisals, which can take longer and cost more, Appreeze offers a flat-rate appraisal conducted through a combination of virtual walkthroughs and licensed appraiser assessments.

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How is a CMA conducted?

Unlike appraisals, CMAs can be performed without an appraiser’s license. A real estate agent, broker, seller, or buyer follows a process that involves the following steps:

Gather property data

They start by collecting detailed information about the property, including its size, features, and condition. This forms the foundation for comparing it to other homes.

Find comparable properties

Then they’ll identify three to six comparable properties, or comps, that have recently sold and are similar to the subject property. These properties should ideally be located within a mile of the subject property and in the same subdivision to ensure accurate comparison.

Analyze comparable properties

They’ll analyze the selected comps in terms of their similarities and differences compared to the subject property. This includes factors such as square footage, number of bedrooms and bathrooms, lot size, and upgrades.

Adjust for differences

Then they must account for the differences between the subject property and each comparable home by assigning a dollar value to those differences. This helps them to adjust the sales price of each comparable home accordingly to reflect what the subject property might sell for if it had similar features.

Calculate price per square foot

Next, they determine the average sold price per square foot for the comparable properties and apply it to the subject property. This gives a more accurate estimate based on current market trends.

Present the CMA

Once the data has been analyzed and adjustments made, they present the CMA to the client, offering a clear explanation of the suggested market price based on the analysis.

Key differences between a CMA and an appraisal

While both a CMA and an appraisal aim to determine property value, they differ significantly in their approach, purpose, and application:

Purpose and use

  • CMA: Primarily used by real estate agents to help buyers and sellers understand the local market and set competitive pricing.
  • Appraisal: Required by lenders for mortgage approval to assess a property’s value for the loan approval purposes. It is a formal and legally binding assessment used to ensure fair lending practices.

Conducting the analysis

  • CMA: Performed by real estate agents or brokers without a specific license. It involves comparing the subject property to similar properties in terms of recent sales, size, location, and condition. The CMA process involves gathering property data, finding comps, analyzing differences, and adjusting values.
  • Appraisal: Conducted by licensed appraisers who follow standardized methods and regulations. The appraisal process is more rigorous and detailed, including an in-depth inspection of the home’s location, age, square footage, number of rooms, and overall condition. The appraiser’s report is a formal document used by lenders and other financial institutions.

Formality and accuracy

  • CMA: Informal and used primarily for guiding negotiations. While it provides a useful estimate, it lacks the officiality of an appraisal.
  • Appraisal: Formal and standardized, providing a legally binding valuation that adheres to IRS regulations. The appraisal report includes a comprehensive analysis of the property and its market.

Cost

  • CMA: Typically provided at no cost by real estate agents as part of their services. It is considered a free tool to help in pricing decisions.
  • Appraisal: Involves a fee, usually ranging from $300 to $500, depending on the property and location. This fee covers the appraiser's professional assessment and detailed report.

Why an Appreeze appraisal is better than a CMA 

While sellers and buyers often rely on a CMA during the early stages of a real estate transaction to get a sense of the property’s market value, it’s important to understand that a CMA is based on broad market trends and recent sales data, often resulting in an estimate that lacks precision. 

A CMA, typically provided by real estate agents, can be useful for setting an initial price or understanding general market conditions. However, it is not a formal valuation and may not hold up in negotiations or for official purposes like securing a mortgage.

An Appreeze appraisal, on the other hand, offers a more accurate and detailed valuation at a flat rate of $395. Unlike a CMA, which relies on comparable sales data, an Appreeze appraisal is conducted by licensed appraisers who conduct virtual video walkthroughs and use the latest technology to deliver a reliable and precise property valuation.

This means that with an Appreeze appraisal, you can confidently use the information for pricing a property, analyzing market trends, negotiating offers, and even securing loans — something a CMA cannot provide.

By choosing an Appreeze appraisal, you get the speed and cost-effectiveness of a CMA, but with the added benefit of a licensed, in-depth assessment that can be used for a wider range of purposes, from listing prices to refinancing.

Use an Appreeze Appraisal for:

  • Pricing a property more accurately
  • Negotiating with buyers or sellers
  • Analyzing current market trends
  • Securing a mortgage or refinancing 
  • Disputing property taxes or resolving legal matters
  • Disputing property taxes or resolving legal disputes
  • Home Equity Line of Credit (HELOC) applications
  • Probate proceedings
  • Estate planning
  • Divorce settlements

Final thoughts

In conclusion, the CMA provides a helpful estimate based on recent sales, while an appraisal offers a formal, detailed valuation required for loan approval. Both methods serve important roles, and understanding their differences can help buyers, sellers, and investors navigate the complex real estate market.

Additionally, an Appreeze appraisal gives you a more comprehensive, reliable, and formal property valuation — at a fraction of the cost of traditional appraisals. With its fast turnaround, affordability, and accuracy, an Appreeze appraisal offers a better foundation for making informed decisions. 

If you're looking for precise property valuation without the drawbacks of a CMA, choosing an Appreeze appraisal is the smarter choice.

If you have any questions or if you need assistance with property valuation, don’t hesitate to reach out to a real estate professional or licensed appraiser. Proper guidance can make a world of difference in your real estate journey.

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