CMA vs Appraisal - My Bizpals Boyenga team

Market Analysis (CMA) vs. Appraisal

Appraisal

Only a California licensed, trained appraiser, with no interest in a property, can do a legitimate appraisal in California. An appraisal looks at properties that are comparable which have sold in the last six months. Appraisals are being reviewed by lenders more than ever now, because market conditions in California are declining so fast. To be similar it should have very similar square feet, same acreage, same age, same school district, and be in a similar neighborhood.

Sometimes in California, it is hard to find an exact match, so the comparable properties are adjusted to more closely match the subject property. Adjustments take the form of placing a value on square feet, bedrooms, baths, and acreage, and then adding or subtracting value so that a more exact comparison can be made. In addition, the appraiser looks at the current condition of the subject property and will adjust its value to reflect its depreciation. Because there is judgement involved in making these adjustments, even appraisals using the same properties for comparison can vary in their result.

As a rule of thumb, a seller will never get a their money back for what they put in to finishing the basement or walkout. So if you are going to spend the money and time on finishing your lower level, do it for your enjoyment and pleasure, not as an investment. Inground pools also have no value, in fact it usually makes it harder to sell your home with a pool in California.

Comparative Market Analysis(CMA)

A comparative market analysis, or CMA, is an informal assessment of a property's market value, usually done by a licensed California real estate agent, like, The Boyenga Team. The evaluation, is based on local active listings in the market, (your competition) and sales data, to determine the probable sale price of a property in the current market. Sellers can use a CMA to help decide on a fair list price. Buyers can use a CMA to help them decide what to offer on a home they want to buy.

The accuracy of the analysis will depend in part on the quality of the data. The more houses a Realtor sells, obviously the better idea they will have on the market value of your home. Until recently the listings used for comparison were ideally to be located in the same neighborhood. Now because of the current market conditions you should compare homes all over your community, because buyers are not stuck on any one particular neighborhood, they are shopping for the best value in every community.

Realtors, like The Boyenga Team, who are active in the market also have another advantage. They have usually had the chance to view the homes which have sold and are for sale. Based on having seen a home, they can easily decide if it really is comparable. Appraisers do not go to open houses and do not place any weight on house style and street appeal. This limits them in someways. House purchases, like almost all purchases, are made on an emotional basis, even though the purchase is usually justified on an intellectual basis. As a result of the different approaches, appraisals often have different results than CMAs. The difference can make an appraisal come out higher or lower than a CMA.

Presently there is little CMA training provided to Realtors, as a result the results can vary even more widely than appraisals. This is why it is so important to choose the right Realtor to help your price your home and not just the one that suggests the highest price. A desperate agent will tell you a price that sounds real good, just to take the listing and then beat you up on the price, week after week after week. A desperate agent will use you and your home to put a sign in the ground just to get calls from buyers and then take those buyers to buy other better priced homes. Thats not what you want is it? Of course not, nobody would!

To get an idea of recent activity in your local marketplace, the CMA should include information about currently available active comparable listings, pending sales, sales that occurred (sold) within the last 6 months, as well as information about listings that did not sell during the listing period. These are called expired or withdrawn listings.

Active Listings

Active listings are homes currently for sale. For sellers, these listings matter only to the extent that they are your competition for buyers. They are not indicative of market value because sellers can ask whatever they want for their home. It doesn't mean any of the prices are realistic. The offered sales prices do not reflect market value until they sell, and in a market like we are in today, a "buyer's market," for example, most sell for a lot less.

Pending Sales

Pending sale listings in your neighborhood represent the most recent sales activity. Try to find out as much about these listings as possible. Beware of the neighborhood grapevine. A combination of wishful thinking and enthusiasm can result in a rumor that a listing sold for an inflated price. The actual sale price may be quite a bit lower. And, that price may not be made public until the sale closes. Pending sales indicate the direction the market is moving. If your home is priced above the list price of these pending sales, you could face longer days on market.

Sold Listings

Homes that have closed within the past six months are your comparable sales. These are the sales an appraiser will use when appraising your home for the buyer, along with the pending sales (which will likely have closed by the time your home is sold). Look long and hard at the comparable sales because those are your market value.

Sold properties give a view of the market during a specific time period, but they do not give much guidance as to the direction of the market. How properties have been selling in an area, the price of comparable properties currently for sale and the size of the inventory of properties in that price range are some of the factors that I would use to price a home.

Even before you have the closing price, inferences can be made about the selling price based on the market history of the listing. Find out how long it took to find a buyer for the home. Were there multiple offers? Or, did the listing take months to sell? Did the sellers have to lower their price to attract a buyer? This sort of information tells you a lot about the current market conditions.

Expired Listings

Expired listings usually indicate an overpriced and a passively-marketed property. This group will reflect the highest median sales price because they did not sell and were probably unreasonably priced. The three most common reasons why an expired listing didn't sell during the listing period is that it was priced too high for the market, the home was not aggressively marketed by a pro-active Realtor, or because the home was in need of repairs and again was not priced right by an experienced Realtor.

A real estate agent's knowledge of the local market can affect the accuracy of a CMA, particularly in a neighborhood with a lot of variability in the housing architecture. Thats why selecting powerful Realtors, like The Boyenga Team, is so critical. Unless the agent has actually seen the comparable listings, he or she may not draw the correct conclusions.

Off-Market / Withdrawn / Canceled Listings

These are properties that were taken off the market for a number of different reasons. The median prices of this group will almost always be higher than the median prices of comparable sales. Usually the reasons homes are removed from the market is because the prices were too high. However, listings also cancel for the following reasons:

1. Seller's Remorse. The sellers decided they cannot part with their home and no longer want to sell.
2. Priced too high. Nobody made an offer or the only offers received were low-ball offers which were rejected.
3. The Days on Market(DOM) were too long. Agents sometimes withdraw listings so they can put them back as a new listing and fool buyers.
4. Repair Requests. The homes were once under contract and after the home inspection, the buyer requested repairs which the seller refused.
5. Seller fired their agent. It's not uncommon for unhappy sellers to fire an agent and hire a new agent. In fact 32 percent of the listings I sold last year were once listed with another Realtor. I specialize in selling homes other Realtors in California couldn't sell.

How To Evaluate Comparable Sales

Comparable sales are those that most closely resemble your home. It is difficult to compare different architectural homes like a tri-level home to a single-story ranch home. Select the homes from the list that are most similar to your home in size, shape and condition, such as:

• Similar Square Footage. Appraisers compare homes based on square footage. Larger square-foot homes are worth less per square foot than smaller square-foot homes. The variance among a group of median-priced homes ideally should not exceed more than 200 to 400 square feet, plus or minus..
• Similar Age of Construction. Ideally, the age of the home -- the year it was built -- should be within a few years of other comparable sold homes. Mixed-age subdivisions are common. For example, in one area, a subdivision consists of homes built in the 1950s, and then the neighborhood right next door, jumps a few decades to the 1990s. Although the homes are located virtually within a few hundred feet of each other, the newer construction homes loaded with updates from the 1990s sell for more than their older Brady Bunch counterparts. If your home was built in 1973, say, and brand new homes up the street are selling for more, you cannot command the same price as a new home.
• Similar amenities, upgrades and condition. Appraisers will deduct value from your home if other homes have upgrades and yours does not. A home with a swimming pool will have a different value than a home without a pool. A completely remodeled home is worth more than a fixer. Homes with one bath are worth less than homes with two or more baths. Deferred maintenance will count against you.
• Location. Everybody knows that real estate is valued on "location, location, location," but have you considered what that means? A home with a view of the city, for example, is worth more than a home facing a cement wall. Homes located on busy thoroughfares are worth considerably less than homes on quiet streets. Compare your home to those in similar locations. If your home sits across the street from a power plant, look for other homes with power plant exposure or those located along railroad tracks, among other undesirable locations. .

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