Mortgage Blog

Difference Between CMA and Appraisal

By January 9, 2014May 25th, 2022No Comments

When you are selling or buying a home, the real estate professionals that deal with the different elements of the final transaction are going to use at least one valuation tool in order to bring your contract to execution. The most common products are a Comparative Market Analysis, or CMA, and an appraisal. Unfortunately, these two items don’t always yield results that are identical or even similar, which can lead to frustration for the parties involved. Understanding the differences between an appraisal and a CMA can help you understand why the numbers can be so far apart.

A good starting point is to note that property valuation represents an opinion, not a factual statement. Analysts complete these products in order to predict an event in the future. While methods based on scientific research go into developing the opinions, such as analyzing and researching transactions involving like properties, there is always a degree of subjectivity in the process of taking these numbers and devising an overall estimate. As a result, the outcomes can have as much variance as opinions about sports teams or politics, as they take influence from the provider’s backgrounds and their various experience in life and in the industry. Asking five realtors for an opinion about the value for one property would likely yield five different responses.

Comparative Market Analysis Canada

The general purpose of a CMA is to help establish a competitive list price for a given property. As a result, people making a CMA use homes of similar square footage and location that are on the existing market to reach their value conclusions. On the other hand, the majority of appraisal reports are designed to give an estimate of market value, which is designed to establish a prediction for a property’s final selling price, on the basis of the actions and attitudes of the average seller and buyer inside the marketplace. This means that an appraiser uses properties that are for sale to set the maximum possible value but only considers sale transactions that have closed when putting together a final opinion as to value.

An additional difference between a CMA and an appraisal is that appraisers have to follow a set of professional guidelines known as the CUSPAP (Canadian Uniform Standards of Professional Appraisal Practice) when they provide a value when acting as a certified or licensed appraiser. A realtor is allowed to advocate for their client to wangle the best outcome or price from a situation, but an appraiser must stay impartial as part of USPAP guidelines, thus providing outcomes that have no influence from any desired result.

Appraisers also face guidelines from lending institutions that are not a part of the CMA process. This can make the difference between the CMA and the appraisal report even wider. An example is the addition of a tennis court to a residential property. A realtor might be of the opinion that the tennis court adds $50,000 to the value of a home because of the installation cost and the general improvement to the property, and the realtor might use that opinion to elevate the value. However, an appraiser has to find actual market data from transactions that have already closed to justify adding a certain amount to the value of a home on the basis of that tennis court. Without that evidence, it is difficult, if not impossible, for the appraiser to justify an increase in value. In a neighborhood where few or no other houses have sold with tennis courts on the property, sellers can end up getting significantly less of a benefit from their tennis court installation at the appraisal than they did from the CMA.

CMA Appraisal Services

In general terms, the appraisal has many more regulations connected to it than does the CMA. Realtors who want to devise a CMA that is reasonably close to the outcome of the appraisal need to spend some time familiarizing themselves with lending guidelines and the USPAP. The professionals at Amansad Financial can connect you with realtors and appraisers in your area that are savvy with the ins and outs of valuing a home, so that you get the best deal out of your purchase or sale. Contact one of our staff via e-mail or give us a call if you want to get the best valuation for a property you are considering purchasing or want to sell.

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