The difference between a Comparative Market Analysis (CMA) and an appraisal is that an appraisal is not concerned with sales, it gives just one value.
Value is not the same as price.
It arrives at this determination of value by taking into account things that realtors are not concerned with, like cost of materials, replacement value, etc.
The CMA offers the seller a range of prices, based on how fast the seller wants to sell, and recommends a price.
There are two ways that buyers can get a CMA:
- The Automated Valuation Model (AVM), this one is used by big outfits like Google, Yahoo, Zillow, etc. This model is plagued with errors due to usage of old, unverified or erroneous data, and there can be wild discrepancies with facts on the ground.
- The Realtor Valuation Model (RVM). This is a model where a realtor uses automated tools but corrects factual data to arrive at a fair market value, using comparable properties.
A comparable property (comp) is one in the same or similar area, with reasonable likelihood to the subject property: number of bedrooms and bathrooms, living area square footage, etc.
After selecting comparables, adjustments are made to the subject property, which may be better or worse.
The RVM is only concerned with market value, and analyzes 4 sets of comparables:
- Expired listings: Properties that did not sell. The most usual cause is overpricing, but it could also be poor marketing.
- Recently sold listings: These properties can be used to adjust the price of what the subject property will probably sell for.
- Pending listings: Properties that are under contract but did not sell yet, can be used much the same as those recently sold, with the caveat that the contract might still fail.
- Active listings: Properties that are listed but might not sell, can be used to see against which properties the subject property will be competing with.
Following you will find an example of an RVM, in this case price was adjusted taking location into account, which is a factor that an AVM cannot gauge accurately.
Download the CMA.