CMA versus Appraisal - Posted by Scott Doreen

Posted by ken in sc on October 09, 2001 at 07:21:00:

Both a CMA and an appraisal are as good as the person who performs them. A good realtor can do a good job predicting the sales price and a good appraiser can as well. Conversely a CMA and appraisal can be grossly inaccurate as well. The only real difference in a CMA and an appraisal is an Appraiser is licensed, so his or her opinion is an “appraisal”. Both are just that, opinions.

Now, where does that leave you? With your knowledge, that’s where. You have to know what values are, or at least know pretty close. If you are not sure, you must buy so low that even if you are wrong you still make money. This is the most important part of the business. Do not put it off on someone else’s opinion of value. Know for yourself, or the market will teach you.

Get good comps. Find out what condition they were in when they sold. Find out if the sold on terms. Drive by and look at them. Talk to the neighbors. Do your own research.

Good luck - Ken

CMA versus Appraisal - Posted by Scott Doreen

Posted by Scott Doreen on October 09, 2001 at 06:23:57:

Our realtor called us the other day with a house that she said she did a (CMA) Compartive Market Anaylisis on and it was worth about 78k. The house will be listed in a few days for 42k. The house is a nice size house and needs mostly cosmetic tlc. I did some looking up in the records and found this house was purchased a year ago at a court auction for 32k. I want to put in an offer ASAP, but after talking to another invester we were told that a CMA could be what ever the realtor wants it to be. I am going to look at the comps today my self and see what I can come up with. The only problem is this house stands alone as it is larger than all the surrounding houses. Any way, I want to make an offer on this to flip it. Im thinking no more than 35K as it sits with it being listed for 42K.

Any suggestions on what to offer?..Also is a “CMA” a valid figure to go by as to what the house is worth as it sit or is it fixed up, or is it just an inflatted number the realtor just dreams up?

Thanx, Scott & Doreen

The difference between CMA & Appraisal - Posted by David Krulac

Posted by David Krulac on October 09, 2001 at 16:01:58:

about $300.

A CMA is done by an agent, you could do the same, no license or expertise is required.

An appraisal is done by a licensed apprasier and costs about $300. The appraisal “should” reflect market value and should be superior to a CMA.

Re: CMA versus Appraisal - Posted by dewCO

Posted by dewCO on October 09, 2001 at 11:39:37:

You can get bogus appraisals and bad CMAs, but you can also get good of each too. Just depends on what you’ve got!

You need to know the market and be able to assess whether this “stands alone” issue is a plus or a negative. Then you need to know whether the agent pulled ALL the comps for the area and are they recent, within the last month or two. Were the PROPER plus/minus adjustments made for sq.ft., location, condition, etc.? Yes, unfortunately agents have been known to eliminate comps which changes the picture you get. They’ve also been known to inflate the value fo the property in order to get the listing and then work on getting the price reduced after they have a long listing period within which to work. SO you need to understand the agent and what kind of CMA was done!

Then you need to know what the market is like. Ours just changed in the last couple of months from a ranging hot sellers market, to a more neutral and even a buyer’s market. It makes a difference as to how you value the property I think.

Re: CMA versus Appraisal - Posted by NCPaul

Posted by NCPaul on October 09, 2001 at 08:00:02:

Ken is on the money when he says that both estimates of value are an opinion and that either one can be on the money or grossly inaccurate. I would add that the reason we use appraisers instead of Realtor’s CMA’s is that the Appraisers are licensed to do the appraisal. That means if the appraisal is grossly innaccurate you have some recourse you can take if you suffer any loss due to the appraisal. (Especially if they have E&O insurance.) Even if you don’t lose money because of the appraiser’s bad work the appraisal board is always checking behind appraisers. I made my living as a appraiser for a while & I can tell you one thing for sure, appraisers for the most part take a trip to the board very seriously an complete their work accordingly. With a a bad CMA by a Realtor you have as much recourse as you have if some broker gives you a bad stock tip! Ken is right, pull your own comps and know your market. You will be better off in the long run if you don’t depend on others any more than you have to.

Re: CMA versus Appraisal - Posted by MikeD

Posted by MikeD on October 09, 2001 at 07:58:07:

Scott, Ask the realtor for a look at the comps that were used to arrive at this CMA, and then do the research on those comps as well as others.