What is the most common type of market study that appraisers are asked to complete?

The perfect example is a comparative market analysis and a real estate appraisal. Many buyers and sellers will ask a real estate agent, “is a comparative market analysis the same as an appraisal.”

It would not be unusual for a layperson to think these two valuation terms have the same meaning.

While there are some similarities when comparing a home appraisal to a comparative market analysis, they are not the same.

Market analysis and an appraisal are two of the most common evaluation methods used in real estate. They both have their own strengths and weaknesses.

A CMA is a real estate agent process, while a house appraisal is a bank process.

Let’s have a look at how they are similar and different from one another.

What is a Comparative Market Analysis?

An appraisal reviews a home’s worth and is conducted by a licensed professional, such as a real estate appraiser.

Comparative market analysis, or CMA for short, is done by a real estate agent who may or may not be professionally trained for performing a valuation.

House appraisals are conducted by a licensed real estate appraiser the mortgage lender has hired to provide financing to a potential buyer.

On the other hand, a market analysis is performed by a real estate agent for either a buyer or seller looking to find out the value of a specific property.

A comparative market analysis is an evaluation tool that real estate agents use to estimate the value of a particular property. They evaluate similar houses that have recently been sold in a nearby geographical area.

Estimating a house’s fair market value can be challenging because many factors determine how much a specific property is worth. Some parts of the evaluation are subjective.

Many things go into adequately evaluating fair market value. Some of the essential considerations include the size of the home, the location, the bedroom and bathroom count, the amenities, and the condition.

How big the land is, the desirability of the lot and the age of the property can also be factors. Real Estate agents also consider how the general market is moving – either up, down, or stable.

How is a Comparative Market Analysis Prepared?

In order to complete a CMA in real estate, a Realtor will visit the property to become more familiar with its characteristics. The best real estate agents will great a detailed set of notes while walking through the home room by room.

Special consideration is given to any features that could impact market value. Specific rooms in a home can hold a significant amount of weight, including the kitchen and the baths.

For example, suppose one home has an updated kitchen with high-end appliances, granite counters, and stainless appliances. In that case, that will add considerable weight vs. a house that has not been updated.

The same can be said for the bathrooms. Real Estate agents take all the information they acquire and compare it to other properties sold within a close radius around the home.

Adjustments are made based upon all of the vital characteristics mentioned above to formulate fair market value.

Real Estate agents and appraisers will both use comps taken from the MLS to arrive at fair market value.

What is a Real Estate Appraisal?

For a mortgage lender to approve a loan, they require that the borrower has enough money to cover the cost of their home. The lender wants to ensure the buyer is not overpaying for the property.

Mortgage lenders do this by hiring a licensed appraiser to evaluate the property. The appraiser will look at many things during their visit.

The lender wants to ensure it recuperates the amount of money it is owed on the loan in case the borrower stops making payments.

The home’s value will be determined by examining the current local housing market, and recent sales of similar properties, much like a real estate agent creates a CMA.

Like a comparative market analysis, the appraisal report will include the vital features of the home, including size, location, bedroom and bathroom count, and extra amenities.

The appraiser will look at the home’s condition and how well it has been maintained. If any repairs need to be done, the appraiser will note this.

A licensed real estate appraiser also completes land appraisals.

What is an Appraisal Gap?

The appraiser will complete a uniform appraisal report on a standard required form. The evaluation could break the deal if there is an appraisal gap between the purchase price and appraised value.

If the selling price and appraisal are not comparable, the lender will not approve the deal. When there is an appraisal gap, a few things can happen.

• The seller can reduce the price to meet the appraisal amount.
• The buyer can cover the appraisal gap by increasing their down payment.
• A buyer can fight a low appraisal, although challenging and winning are rare.
• The buyer can walk from the deal if there is no appraisal waiver.
• The seller and buyer can compromise by the seller reducing the price some and the buyer increasing their down payment.

Appraisals Are Often Waived in Hot Real Estate Markets

In extreme seller’s markets, buyers will often waive the appraisal in order to make their offer more attractive. When housing demand outweighs inventory by a large margin, bidding wars become commonplace.

Unusual things take place, such as buyers waiving home inspections and appraisals. Some buyers will even offer cash for houses to increase their chances of coming out on top.

When the local real estate market favors sellers, there are often few contingencies in real estate contracts.

Why is a Market Analysis Performed?

There are two significant reasons for creating a comparative market analysis (CMA). A CMA is a vital tool used by listing agents to price a home for sale accurately.

Home seller’s across the country rely on this information when listing their home for sale.

An inaccurate CMA leads to long days on the market and price reductions. Neither is beneficial for the seller as data shows that overpriced homes sell for less than when appropriately priced from day one.

Buyer’s agents also use a comparative market analysis to determine market value. To craft an offer that makes sense, buyers rely on their agent to provide an accurate CMA.

When a comparative market analysis is inaccurate, buyers and sellers can suffer financially. The CMA can also be used when obtaining what a property is sold at.

Which is More Accurate a Comparative Market Analysis or Appraisal?

From being a real estate agent for thirty-five years, there are a lot of real estate appraisers with big egos. They are never wrong about anything.

The truth of the matter is real estate appraisers are human beings just like the rest of us. They do make mistakes. There are good appraisers and bad appraisers, just like any other profession.

You would undoubtedly get five different values if you asked five different appraisers to provide a value for the same house. What does that tell you?

The same can be said about real estate agents. Some are incredible at accurately determining the market value of a home, while others are not.

If the number of price reductions daily is any indication, you know that real estate agents are not always reliable at providing accurate real estate values.

The bottom line is not to assume that an appraisal is more accurate than a comparative market analysis. Both are opinions of value. It depends on who is providing the information.

Is One Valuation Method Better Than Another?

Not necessarily. It comes down to the professionals involved.

Would a new appraiser be better at coming up with the market value of a home vs. a real estate agent who’s been doing evaluations for decades? Probably not.

The reverse would also be true. As already mentioned, there will be some that are better at their job than others.

Both comparative market analysis and appraisals have their own strengths and weaknesses. It depends on your needs which method is better for you.

Real Estate Agents Sometimes Are Purposely Not Accurate

There is one circumstance, however, that home sellers need to be keenly conscious of when comparing a real estate appraisal to a comparative market analysis.

Unfortunately, in every business, some are not that professional. Real Estate is no different.

A common tactic with some real estate agents is to tell a seller what they want to hear to get their business.

While it is the oldest trick in the book, it routinely happens when a seller interviews multiple real estate agents.

Every now and then, an agent will give a market analysis significantly higher than their competition. Agents do this to increase the chances of a seller hiring them.

For sellers, human nature kicks in. We all want to believe our homes are better than our neighbors. Sometimes that’s not the reality even though you believe it to be true.

Data never lies, but real estate agents do. On the other hand, an appraiser doesn’t have the devil on one shoulder and an angel on the other.

Keep in mind the accuracy of a property evaluation is only as good as the person who's been assigned to complete it!Click To Tweet

Pricing of an Appraisal vs. Comparative Market Analysis

The cost is one of the more significant differences between a comparative market analysis and an appraisal.

A CMA is almost always free. Real Estate agents rarely ever charge for completing a comparative market analysis.

An appraisal costs money. When buying a home, an appraisal will be part of your closing costs. You can expect to pay in the neighborhood of $300-$500. It will depend greatly on your location and the complexity of the property.

If you sell a home and want it appraised by an appraiser, there will also be the same charge.

So if you are looking for an unofficial value of your home for free, getting a comparative market analysis would be the way to go.

Zillow Home Values Are Neither a CMA nor an Appraisal

When looking for an accurate property value, whether buying or selling, never trust a Zillow home value. Unfortunately, home value algorithms are not trustworthy.

If you want an accurate assessment of your home’s value, you need to hire an appraiser or real estate agent. If you look at the resource provided, you’ll quickly realize all of the reasons why a Zillow value is not accurate.

Final Thoughts

A comparative market analysis and a home appraisal are integral parts of almost all real estate transactions. It is essential to understand the pros and cons of each.

In some circumstances, a real estate appraisal would be the way to go, while in others, a CMA will be perfectly acceptable.

About the author: The above Real Estate information on appraisal vs. comparative market analysis was provided by Bill Gassett, a Nationally recognized leader in his field. Bill can be reached via email at or by phone at 508-625-0191. Bill has helped people move in and out of many Metrowest towns for 35+ years.

Are you thinking of selling your home? I am passionate about real estate and love sharing my marketing expertise!

I service Real Estate Sales in the following Metrowest MA towns: Ashland, Bellingham, Douglas, Framingham, Franklin, Grafton, Holliston, Hopkinton, Hopedale, Medway, Mendon, Milford, Millbury, Millville, Natick, Northborough, Northbridge, Shrewsbury, Southborough, Sutton, Wayland, Westborough, Whitinsville, Worcester, Upton, and Uxbridge MA.

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Appraisal vs. Comparative Market Analysis: Similarities and Differences

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Do you know the differences and similarities between a comparative market analysis and a house appraisal? It's crucial to know!

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Maximum Real Estate Exposure

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