Yesterday, I told N. that she needed an appraisal. Why didn’t I say she should get a Comparative Market Analysis (CMA) from a real estate agent? Because N. will be working with a lender. The value figure she needs is the amount that a lender will accept for collateral.
An appraiser uses the standards that lenders require to establish the value of property used as collateral. They also valuate in legal matters such as divorce and estate sales. That’s their job.
Real estate agents establish fair market value in order to help their clients sell and buy homes. Potential listing agents do a Comparative Market Analysis as data to establish fair market value. This is only one piece of the marketing plan to establish the highest price that a buyer may pay for the property. Buyer’s agents work a lot like potential listing agents. Their goal is to establish a fair market value as part of a negotiation plan. That information is one part of the advice on how to make an offer that is the lowest possible one that a seller would accept.
Both appraisers and real estate agents use comparable properties that have sold recently. These comparables are the best match by location, size and type. “Best match” is in the eye of the beholder.
Both appraisers and real estate agents consider the market conditions. Appraisers generally work with established data based on town or city. Real estate agents can look at specific neighborhood patterns, or the sale of certain types of house. The appraiser’s data is less locally sensitive.
The agents also look at properties that are under agreement (have a signed contract, but have not closed) for indications of both value and market conditions. The agents look at properties that were on the market, but never sold for indications of both value and market conditions.
Did I miss anything?
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