Home buyers and sellers need to determine their home value. Home value is otherwise known as a fair market value. Both parties can highly benefit from this for various reasons. On the buyer’s side, if they know the value of the property, they can make the right offer price. The will know exactly what constitutes a low-ball offer and avoid it. In fact, they will know the highest and lowest prices that they can give without compromising the seller. On the other hand, sellers need to determine the value of the property for pricing purposes. The fair market value allows them to objectively price their homes. In the end, they can avoid overpricing, which usually results to an expired property.
Determining the value of your homes can be done in two ways. One is through CMA or Comparative Market Analysis. And two, is through appraisal. What are they? How are they obtained? Which is more reliable than the other? To answer, these questions, refer to the following sections.
Getting to know CMAs or Comparative Market Analysis
CMA is commonly provided by real estate agents. They use this report to help buyers and sellers to ascertain the fair market value of a particular real estate property. You can obtain a CMA simply by asking your real estate agents. They have all the tools to generate this. Examples of these are the MLS or Multiple Listing Service and they can also use their experience to select comparable (comps) properties for evaluation.
In making the CMA, real estate agents would find properties, with similar land area and features, sold in the past 6 months. On the report, you will see the specific details of the property and its condition. The more details you have about the property, the better it will be for you.
You also have the option to make your own CMA. But it takes time and experience to make a good one. However, if you are planning to sell properties on your own, you can try to make this. You just have to know the important data to be compared. You also have to do extensive research by attending open houses. The more you eyeball properties, the better your comparative analysis will be. It is even better than just relying on an agent picking out comps from the MLS.
Getting to Know Appraisals
Licensed appraisers are the most reliable people to make an appraisal. Appraisal can give buyers and sellers a detailed opinion about real property values. Lenders rely on this data to ascertain the value of property being financed by mortgage. Appraisals also help them to determine the worthiness of the property for investment.
Two approaches are used in doing appraisal. They are sales comparison and cost approach.
Which is better than the two?
Both of these reports are reliable sources to determine the value of the real estate property. However, appraisals are more costly than CMAs. CMA can come free. On the other hand, good appraisals come with a cost. Moreover, they have more unbiased results compared to CMAs.
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