| WHAT IS A "CMA?" When owners
offer a home for sale they logically want the best possible price and terms for their
property. A "comparative market analysis" or "CMA" is an estimate of
value prepared by a real estate broker or salesperson that shows recent past sales for
like properties and suggests a possible asking price for the owner's property.
HOW CAN I EVALUATE DIFFERENCES IN
CMA'S?
Question:
We've talked to four different real estate firms about listing our home. Three
of the market analyses came up with a fairly similar price; but the fourth one was
considerably higher. What's the harm in starting at the highest price, since we can always
come down?
Answer:
If three out of four comparative market analyses were close, it leads me to
believe that the fourth was not a true reflection of market value. Unless there was
additional information known only by the fourth company, the approximate value indicated
by the other companies is probably closer to what a ready, willing and able buyer would
offer
It's important that your property be competitively priced the moment it hits the
market.
An overpriced property will be forgotten by buyers and real estate agents.
Statistics show that not only will an overpriced listing take longer to sell, but the
sales price will usually be lower than true market value.
SHOULD
I APPRAISE MY PROPERTY BEFORE LISTING?
Question:
I'm just starting to look for my first home and am amazed that more sellers
don't have appraisals done before placing property on the market. If there is an
appraisal, can't I request that the real estate agent ask the seller to show it to me
before I make an offer?
Answer:
You're correct---many sellers don't secure an appraisal before placing the home
on the market. This doesn't mean, however, that they don't have an idea of the property's
market value. They may have secured a comparative market analysis from an agent, showing a
range of value, anticipated marketing time, as well as types of terms which can be
expected for the property. Most houses do not require a presale appraisal unless the
property is so unusual that no comparable properties are available.
An appraisal may actually be a detriment to the marketability of the property.
What happens if the appraiser has few comparables to use in his appraisal, causing the
appraisal to come in unrealistically low? What if the seller secures an appraisal suitable
for a conventional loan, only to find that the property later sells with FHA terms,
requiring another appraisal?
If an appraisal has been done, the buyer can certainly ask to see it, just as
the seller can deny the request. If the seller orders the appraisal, it is considered to
be his confidential information. If the real estate agent is working for the seller and is
aware of the appraised value, he or she would need permission from the seller to share
that information with anyone else.
If you have reservations about the value, why not make the receipt of a
satisfactory appraisal part of the terms of your offer to purchase? And if you're seeking
lender financing, it's generally a loan requirement as well.
IF THE APPRAISED VALUE AND
THE SALE PRICE OF A HOME ARE DIFFERENT, WHICH WILL LENDERS USE WHEN GRANTING A
MORTGAGE?
Whichever is lower.
Lenders want as little risk as possible, so they will look at both the sale
price and the appraised value and then make a loan based on the lower of the two numbers.
CAN A SELLER CONTEST AN APPRAISAL?
Question:
Our agent brought us an offer of $120,000 contingent upon receiving an appraisal
for that price. The appraisal came in at $116,000, which means that the sale could be
called off. This value seems very low based on what other properties around us have sold
for. Is there any way we could argue the appraisal?
Answer:
Absolutely. An appraisal is one person's estimate of value. Even though
statistical data is used to arrive at the value, you and the agent are more than justified
in questioning the appraiser's findings.
I would suggest that the listing agent handle it by providing comparable sales
(called comps), to the appraiser. These sales can come from multiple listing service
information, sales within the brokerage, or from for-sale-by-owner properties. Be sure to
mention any sales of properties you're aware of in your neighborhood that the agent could
check out.
The agent would prepare the information in written form and submit it to the
appraiser. An appraiser may not be aware of a particular recent sale, or may have
overlooked a property feature on the report which could lend extra value to the property.
Most appraisers welcome inquiries, and have been known to make adjustments to a
report if the new information warrants.
SOMEONE
HAS MADE AN OFFER ON MY HOUSE. THE TRANSACTION DEPENDS ON THE ABILITY TO GET
FINANCING. WHAT HAPPENS IF THE APPRAISED VALUE IS LESS THAN THE SALE PRICE?
Lenders will provide financing on the basis of the sale price or the appraised
value -- whichever is less. This means if the appraised value is less than the sale price,
the seller may have to lower the price, the buyer may have to offer more cash, or both
parties may need to make some concessions.
WHAT STAYS WITH A HOME AND WHAT
GOES?
In general terms, items which are physically attached to and intended to be part
of a home are expected to stay. Example, if there is a built-in dishwasher it should stay
-- if the sellers take it there would be a large hole in the kitchen cabinets.
Items that stay are called "fixtures" but it is sometimes difficult to
determine what is or is not a fixture. Moreover, one can "create" a fixture in a
purchase offer by saying that as a condition of the deal, the backyard swing set (or
whatever) will stay.
The best approach to fixtures is to list what stays in the purchase offer. For
details, speak with a broker or attorney, as appropriate
IS AN ASSESSMENT
USEFUL IN DETERMINING MARKET VALUE?
Probably not.
Assessments in many areas are only changed every two or three years, and thus
may not be current. As well, assessments may be capped by state or local regulation to a
given percentage increase which does not reflect market changes. Lastly, assessments may
not reflect full values. For instance, there may be a special reduction for senior
citizens.
WE ARE REFINANCING
OUR HOME. I THINK THE LENDER'S APPRAISAL OF MY HOME IS TOO LOW. WHAT CAN I DO TO SHOW
A HIGHER VALUE?
Step one is to call the appraiser and ask if the matter can be discussed. Do not
tell the appraiser his or her information is wrong. An appraisal is an independent measure
of value and opinions can differ, particularly with properties that are unique in terms of
size, location, and condition. Simply say you felt the value should be higher and you
would like to see how the appraisal was determined. Be respectful -- the appraiser is a
licensed professional with no stake in the transaction. Most appraisers will gladly
discuss their report.
If you are not satisfied with the appraiser, then ask to speak with the loan
underwriter. Explain your viewpoint -- be prepared with sale information and other
documentation.
If the underwriter agrees with the appraisal, then offer to pay for a second
appraisal by an appraiser selected by the lender -- or consider working with another
lender (but ask what happens if an appraisal for a second lender is the same or lower than
the first).
FOR A LIST OF AREA APPRAISERS CLICK HERE |
