Home Valuations, CMA’s, Appraisals-What’s the difference?

Home Valuations, CMA's(Comparative Market Analysis), Appraisals all seem to measure what a home is worth so what is the difference?  Home Valuations are also known as Automated Valuations and are usually generated on a website by a computer algorithm.  CMA's are a real estate agent's opinion of what is a home's value based on competitive homes on the market.  Appraisals are an appraiser's opinion of worth based on a variety of factors.

What’s the house really worth?

Before the Internet, consumers had few resources to gain insight into what homes in their neighborhood were selling for. They could talk to neighbors, call a real estate agent or appraiser, or manually search through public records.Today, however, consumers can turn to one of the many Web-based home valuation sites for a price estimate of almost any home in the country. As useful and services may seem to buyers and sellers, you've probably discovered by now that the price estimates are usually far from accurate.

Source: The Story Behind Home Valuation Sites | Realtor Magazine

People also ask, What is my Home worth?

Home Valuations

What is it? Home Valuations are a way of getting an approximate idea of what your home is worth.  It is a starting point in getting an idea of what your home is worth.  Home Valuations try to decide market value.

How does it work? Most of them work by using an algorithm to estimate the value of your home.  They consider what your home last sold for as well as current market conditions.  They will use public records to get the information on your home and using other market data make an estimate based on current market trends.  What most people are familiar with as far as automated home values is Zillow's "Zestimate".

Are they accurate? Up to a point, they can be either pretty accurate or totally inaccurate.  There are several reasons for this; your county details aren't correct, you got a great deal on your home, or most commonly you made improvements to the home.  The biggest problem with most of these automated home value sites is that it doesn't know the house individually.  There are details in homes that can make a huge difference in the actual home value.

The home valuation that I have on my website allows you to confirm details of your home and select homes that are truly comparable to your home.  It will also alert you by email when a home nearby sells or comes on the market that will affect your home's value.  You can get a home valuation here.

Should You get one?  If you are not planning on selling your home in the next month, but are planning on selling in the next year it is a great way to get educated on what is going on in your area.

Cost: Free, but some information is required.

CMA's(Comparative Market Analysis)

What is it? A CMA is an analysis of what is going on specifically in your market with your home.  In most cases, a real estate agent will need to visit your home to do a CMA.  While a home valuation will take into account market data, a CMA will also involve noting the condition of your home as well as any upgrades or repairs made to the home that may impact value.  The CMA will help you decide market value.

How does it work?  If done correctly, a CMA will be a thorough examination of your home.  A CMA will find what the agents opinion of your home's market value is based on many factors.  Some of these are; area market conditions, neighborhood market conditions, home improvements, renovations, additions, what comparable homes are listed for and selling for, and condition of your home.

Are they accurate? Most of the time, yes.  You should carefully look over the comparables and the report.  The agent should be able to explain to you where they came up with their opinion of your home's value and what factors influenced it.  If done properly,  a CMA will give you a range of values which you can list your property in.  Please note that as markets change, your sales price may need to be increased or decreased.

When should You get one?  If you are planning on listing your home in the next few weeks. If you wait any longer than that then the market conditions will make the report less accurate.  You can request a CMA here for free.

Cost: Free usually, contact a REALTOR®.

Appraisals

What is it? An appraisal can only be done by a licensed appraiser.

What is an appraisal

A home purchase is the largest, single investment most people will ever make. Whether it's a primary residence, a second vacation home or an investment, the purchase of real property is a complex financial transaction that requires multiple parties to pull it all off.  Most of the people involved are very familiar.

The Realtor is the most common face of the transaction. The mortgage company provides the financial capital necessary to fund the transaction. The title company ensures that all aspects of the transaction are completed and that a clear title passes from the seller to the buyer.So who makes sure the value of the property is in line with the amount being paid?

There are too many people exposed in the real estate process to let such a transaction proceed without ensuring that the value of the property is commensurate with the amount being paid.This is where the appraisal comes in. An appraisal is an unbiased estimate of what a buyer might expect to pay - or a seller receive - for a parcel of real estate, where both buyer and seller are informed parties. To be an informed party, most people turn to a licensed, certified, professional appraiser to provide them with the most accurate estimate of the true value of their property.

Source: What is an Appraisal? - Steven Sachs Real Estate Apraisal, Wilmington, DE

How does it work?

The Sales Comparison

The appraiser will inspect your property and use comparables to decide the value.  The appraiser will adjust their opinion of value based on a scale that they use.  The sales comparison accounts for a variety of factors including but not limited to; lot size, view, design, appeal, construction, condition, patio, deck, garages, porches, fireplaces, pools, remodeling, windows.  The appraisal report will give you appraised value.

There is also a second method of appraisal call the cost approach.

Cost Approach

The cost approach is the easiest to understand. The appraiser uses information on local building costs, labor rates and other factors to determine how much it would cost to construct a property similar to the one being appraised. This value often sets the upper limit on what a property would sell for. Why would you pay more for an existing property if you could spend less and build a brand new home instead? While there may be mitigating factors, such as location and amenities, these are usually not reflected in the cost approach.

Source: What is an Appraisal? - Steven Sachs Real Estate Apraisal, Wilmington, DE

Why should You get an appraisal?

Anytime you buy a home with a mortgage, a bank will require one.  A Seller would have an appraisal completed prior to listing your home for sale so they could market the home at "appraised value".

Cost: It varies based on the appraiser, but appraisals are usually between $300-$500.