What’s the Difference Between a Real Estate Appraisal and a CMA?

Appraisal vs CMAReal estate is an industry with a language all its own. When you’re a professional, it’s easy to throw out specialized acronyms and terms. But what about everyone else?

Two real estate terms that often get confused are appraisal and CMA. These are definitely not the same. Knowing the difference — and being able to explain it clearly to clients — is something every real estate agent needs to master.

What Is a CMA?

In the home selling process, a CMA — that’s short for comparative market analysis — happens early on. Seller’s agents will complete a CMA to come up with the best possible list price for a property. A CMA is actually more of a process than a product, and a lot of work goes into the final number. Even so, most agents provide a CMA as a free service to their clients.

To complete a CMA, a real estate agent researches similar homes — often called "comps" — that have recently sold to understand the current market in a given location. This involves using the Multiple Listing Service, or MLS, to find properties similar to the one they’re trying to sell. These similarities include square footage, acreage, location, and features such as the number of bedrooms, bathrooms, and various amenities.

It’s usually impossible to find an exact match when it comes to finding comps. A great real estate agent will analyze similarities and differences to determine a home's market value. The CMA presents comparable properties and their final sales prices. It also uses this data to develop a proposed asking price for a home that’s new to market. 

The Bottom Line: A CMA is an estimate of a home’s market value. It is completed by real estate agents at the beginning of the selling process.

What Is an Appraisal?

While a CMA is a fairly casual process driven by an agent’s experience and instinct, an appraisal is a formal valuation. Rather than being driven by the selling process, an appraisal occurs on the buyer’s end, and it’s typically driven by the needs of the mortgage lender.

When a buyer requests a loan for a specific property, the bank wants to make sure the property is worth their investment. To this end, the bank will require an appraisal of the home’s value to be completed by a neutral third party. Home appraisers are licensed by individual states, and they work for a fee. 

Home appraisers follow a formal process that takes into account many aspects of both the interior and exterior of the property. They are trained to assess the current condition of a property, including its age, condition, and functionality. 

Real estate agents can work as home appraisers, though it’s important to check licensing regulations in your state, as well as any conflict of interest rules that may apply.

The Bottom Line: An appraisal is a formal evaluation of a home’s market value. It is completed by licensed appraisers at the end of the being process.

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