Market Analysis

Comparative Market Analysis

A Comparative Market Analysis (CMA) is a process used by real estate agents to value a home. It’s based on similar homes that have recently sold, and are currently for sale, in the same area. Agents find comparable sales and current market data and conduct a sales comparison. In most cases, an agent will consider many homes that have recently sold, ideally those that are as similar to and located as close to the home being valued as possible. Each one is then analyzed to pinpoint differences between it and the home being valued. Once these differences are priced out, the price of each comp is adjusted to see what it would cost if it was identical to the home being valued were it to be sold in the current market. Unlike an appraisal, a CMA also typically considers homes that are currently on the market. A strong agent will look into details beyond selling price, such as local inventory, days on market before sale, and seller concessions made that would not be reflected in the total purchase price.

Appraisals

Based on a Professional’s Opinion

An appraisal is an unbiased valuation of a home based on a licensed appraiser’s professional’s opinion. Mortgage companies typically require an appraisal for home purchases and refinancing. A lender usually orders a home appraisal, and the cost of the appraisal, sometimes up to $500, is paid directly by the homeowner. An appraiser does a complete visual inspection of the interior and exterior of the home, and takes into consideration recent sales of similar properties (typically 3 properties.) The appraiser then compiles a detailed report on the home, including an exterior building sketch, a street map showing the home and location of any comparable sales, photos of the home and street, an explanation of how the square footage was calculated, and other relevant information. Appraisals are a professional, standardized approach used primarily for lending and tax assessments.  It’s good to note that they do NOT always accurately predict or reflect true market value, which is what someone is actually willing to pay.

Refinancing

Lenders base the amount of their loans on the value of your property and usually allow you to borrow a maximum of 75% to 96.5% against your property. Knowing what your home is worth also allows lenders to calculate your equity in the home. The more equity you have, the better terms you will receive on your refinance.

Home Improvments

If you’re doing home improvement projects to increase the resale value, you want to make sure you’re not pricing it out of the market. If your home is already priced on the high-end for your neighborhood, making too many improvements could make it more difficult to sell. When you get a valuation, you can see how your home compares with others in the neighborhood and let this guide your home improvement decisions. Our professional team is well suited to help you work through the nuances of what updates may (or may not!) be worth making before you sell. We even offer concierge services to help manage bids, timelines, and contractors should you decide to make improvements!

Qualifying For Credit

If you want to borrow cash against your home, getting a Home Equity Line of Credit (HELOC) could be a good option. To qualify, you must have a certain level of equity in your home. Most lenders require at least 20%. Getting a home valuation will help you determine if you qualify and will be used by the lender to make a decision on your loan.

Planning

Though it’s not a necessity, keeping track to know the value of your home is a good idea. It will help you plan for the future and deal with unforeseen circumstances when you might be in a position that requires extra money, or a quick relocation. Knowing how much equity you have in your home, and how much you may be able to borrow against it or sell it for, could help you respond to any financial curveballs or changes life throws at you. It can also help you stay on top of the market overall so that you have a better understanding of history and current trends if you are considering moving someday.