Apparisal VS Market Analysis 
By Jim Palmer Jr.

Many property owners find the need to have a professional valuation of a property when they are considering selling or when they inherit property and need to adjust their basis or because they want to confirm the tax assessor’s accuracy.  Property valuation comes in a couple of forms, appraisals by paid appraisers or market analysis by a broker. 

Real estate brokers are often asked to perform a Comparable Market Analysis (CMA) for general information, but most of the time they do the CMA just prior to listing a property for sale.  Appraisals always cost money, while in contrast, brokers frequently do their valuation for free, with the prospect of listing the property for sale at a future date.

Appraisers who do the appraisal at point of sale have a distinct advantage over the broker who does the CMA because buyer and seller have already established a sales price.  The appraiser is tasked with finding comparables which justify the value of the collateral to the lender. 

The process of valuation for a broker doing a CMA is more complicated.  The broker has no starting point and the only hint they may have might be the value a tax assessor has assigned to the property. 

They begin the search by using a broad price range but with narrow criteria, such as location, square footage, acreage size, amenities, etc.  They search the Multiple Listing data base for comparables that match specific criteria and which have sold (not more than a year back in time).  There is no crystal ball to look into the future!  What brokers really like is to find a minimum of 3 sold comparables that are a close match to the subject property. 

Since no two listings are exactly alike, adjustments must be made during that comparison process to make them equal.  Once adjustments are made for the differences between the subject and comparables (plus or minus), the broker can calculate the average sales price for that product.  That process is called a Market Sales Approach.  In rural areas brokers may find too few comparables to come to a definitive opinion of value, so they may combine a Market Sales Approach with a Cost Approach (replacement value) to augment that data.       

An appraisal or CMA is not fact, but only an opinion of value.  Sellers often dispute those opinions and list the property for a higher starting point, but the fact remains that in most cases a lender will order an appraisal and will only lend if an appraisers valuation matches, or is more than, the sales price.