MARKET ANALYSIS

Comparative Market Analysis

A Comparative Market Analysis (CMA) is a tool used by real estate agents to value a property. It evaluates similar properties that have recently sold in the same area. Agents find comparable sales and use them to conduct a sales comparison. In most cases, an agent will find three properties that have recently sold and are as similar to—and located as close to—the property being valued as possible. Each one is then analyzed to pinpoint differences between it and the property being valued. Once these differences are priced out, the price of each comparable property is adjusted to determine what it might sell for in the current market if it were identical to the property being valued.

APPRAISALS

Based on a Professional’s Opinion

An appraisal is an unbiased valuation of a property based on a professional’s opinion. It is commonly used by mortgage companies for property purchases and refinances. A lender usually orders a property appraisal, and the cost—sometimes up to $500—is paid by the property owner. An appraiser conducts a complete visual inspection of the property’s interior and exterior while also considering recent sales of similar properties and current market trends. The appraiser then compiles a detailed report on the property, including an exterior building sketch, a street map showing the property and any comparable sales, photos of the property and street, an explanation of how the square footage was calculated, and any other relevant information.

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 property is worth allows lenders to calculate your equity in the property. The more equity you have, the better terms you will receive on your refinance.

PROPERTY IMPROVEMENTS

If you’re doing property improvement projects to increase the resale value, you want to make sure you’re not pricing it out of the market. If your property 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 property compares with others in the neighborhood and let this guide your property improvement decisions.

QUALIFYING FOR CREDIT

If you want to borrow cash against your property, getting a Property Equity Line of Credit (HELOC) could be a good option. To qualify, you must have a certain level of equity in your property. Most lenders require at least 20%. Getting a property 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, simply knowing the value of your property is good information to have. 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 property and how much you may be able to borrow against it or sell it for will help you respond to any financial curveballs that life throws at you.