MARKET ANALYSIS

Comparative Market Analysis

A Comparative Market Analysis (CMA) is a tool used by real estate brokers to value a property. It evaluates similar properties that have recently sold in the same area. Brokers find comparable sales and use them to conduct a sales comparison. In most cases, a Broker will find a few 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 comp is adjusted to see what it would cost if it was identical to the property being valued were it to be sold in the current market.

APPRAISALS

Based on a Professional’s Opinion

An appraisal is an unbiased valuation of a property based on a professional’s opinion. They are usually what mortgage companies use for property purchases and refinances. A lender usually orders a property appraisal and the cost of the appraisal, sometimes up to $500, is paid by the homeowner. An appraiser does a complete visual inspection of the interior and exterior of the property as well as taking into consideration recent sales of similar properties and 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 leverage on the value of your property. Understanding 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 quotes.

PROPERTY IMPROVEMENTS

If you’re doing  improvements 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 receive a valuation, you can see how your property compares with others in the neighborhood and let this guide your property improvement decisions and its overall ROI.

QUALIFYING FOR CREDIT

If you want to borrow cash against your primary residence, getting a Home Equity Line of Credit (HELOC) could be an excellent option to free up some liquidity. To qualify, you must have a certain level of equity in your property. Most lenders require at least 20%. Obtaining 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 understanding the value of your property is crucial 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 capital or a quick relocation.