Realtor.com just launched “Ask A REALTOR®”, where you, the consumer, send in questions to be answered by professionals in the industry. We are honored to be selected as their Miami/ Miami Beach representatives and recently answered the following question.
What is the difference between an appraisal and a competitive market analysis (CMA) from a REALTOR®?
An appraisal and a competitive market analysis (also referred to as comparable market analysis or CMA), are both used to arrive at a value of a particular property. In a perfect world, we would like to think that both appraisals and CMA’s would arrive at the same or similar value; but since we don’t live in a perfect world, these are the differences.
An appraisal is typically used for financing purposes and is usually done by a registered, licensed or certified appraiser. Appraisals are ordinarily ordered by banks in order to come to an estimate of value for financing purposes. Appraisals generally use only closed sales to arrive at value. A CMA is usually done by a REALTOR® and is used by people who are ready to market their property, although some buyers will ask for CMA’s as well.
A CMA will not only look at closed sales, which will determine what buyers are willing to pay for properties at any particular time, but will also look at active, pending and expired listings to determine what sellers expect or wish to get for their properties. Active listings are included to show what a property’s competition will be at the time of marketing. Expired, withdrawn or cancelled listings will show what buyers were not willing to pay for particular properties.
In today’s market you can expect appraisal values to be more conservative and values in a CMA to be more aggressive with the purpose of getting the highest amount for a seller or getting the best deal for a buyer – the CMA will always favor buyer or seller depending on who is asking for the analysis.