How Does an Appraisal Differ From a CMA?

As an independent, third-party home valuation, an appraisal value isn’t that much different from a CMA value.

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What is an appraisal? What’s the difference between an appraisal and a CMA (current market analysis)?

When buyers obtain a mortgage loan to buy a house, the house they’re buying is required to have an appraisal. An appraisal is an independent home valuation that banks order through a third-party company who supplies the appraiser. Both buyers, sellers, their agents, the lender, and anyone else involved in the transaction is kept removed from the appraisal process in order prevent mortgage fraud and protect the appraised value.

To perform their valuation, appraisers will compare the home in question to other homes that have recently sold. We’re in an appreciating market right now, which means appraisers are having a hard time keeping up with values. To find comparable homes, appraisers typically search within a one-mile radius and look at homes in a similar age range with the same style.

"Both buyers and sellers are kept at arms’ length from the appraisal process."

They also take note of other homes’ square footage, both on the main floor and in the basement. The GLA, or gross living area, encapsulates all of a property’s above-ground square footage. The above-ground square footage is calculated at a different rate than the below-ground square footage. This is one of the reasons appraisal adjustments may look a little funny or somewhat different than what a builder might say it costs to build a home. There are certain national standards and guidelines they have to follow, though, and because they’re using comparable properties, they usually give a good valuation.

After the appraisal is finished, an underwriter will then take a look at it. Depending on the price range, or if they have some questions, they may require a second appraisal. As I said, it’s an independent, third-party opinion, so no two appraisals are exactly alike.

A CMA is something that I would do since I’m a Realtor and not a licensed appraiser. Utah is a non-disclosure state, so appraisers use the MLS, a tool that Realtors use, to get most of their data. That’s why we try very hard to make sure our data is correct. A CMA is similar to an appraisal, we just don’t put it in a form to be submitted to an underwriter.

Basically, Realtors are the ones setting prices and working with buyers and sellers, and appraisers are the ones using that data.

If you have any more questions about appraisals or you’d like a free, no-obligation CMA, don’t hesitate to call or email me. I’d be happy to help you.