MARKET ANALYSIS

Comparative Market Analysis

A Comparative Market Analysis (CMA) is a tool used by real estate agents to value a home. It evaluates similar homes 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 or more homes that have recently sold and are similar to and located as close to the home being valued as possible. Each sale 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.

APPRAISALS

Based on an Appraiser's Opinion

An appraisal is an unbiased valuation of a home based on a professional appraiser’s opinion. Appraisals are utilized by mortgage companies for home purchases and refinances. The lender usually orders a home appraisal and the cost of the appraisal, approximately $500, is paid by the homeowner. An appraiser does a complete visual inspection of the interior and exterior of the home as well as taking into consideration recent sales of similar properties and market trends. The appraiser then compiles a detailed report with detailed data that supports their final estimate of value.

REFINANCING

Lenders base the amount of their loans on the value of your property and usually allow you to borrow a maximum of 80% to 96.5% against your property. Knowing what your home is worth allows lenders to calculate your equity in the home. The more equity you have, the better terms you will receive on your financing.

HOME IMPROVEMENTS

If you’re doing home improvement projects, you will want to make sure your resale expectations are in line with the market. If your home is already priced on the high end for your neighborhood, be careful not to over improve your property. A valuation allows you to compare your home with others in neighborhood and guide you on your home improvement decisions.

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, simply knowing the value of your home 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 home 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.