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 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 purchases and refinances. A lender usually orders an appraisal and the cost of the appraisal, which can depend on the extent of the property, is paid by the owner. An appraiser does a complete visual inspection of the property as a whole, including the plot of land, the internal and external quality and features of structures,  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 any applicable exterior building sketches, a street map showing the property and any comparable sales, photos of the property and street, an explanation of how any square footages were 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 assets equity. The more equity you have, the better terms you will receive on your refinance.

HOME IMPROVEMENTS

If you’re doing home 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 listing compares with others in the neighborhood and let this guide your home improvement decisions.

QUALIFYING FOR CREDIT

If you want to borrow cash against your property, 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 property. Most lenders require at least 20%. Getting a 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 circumstances that might require you to have access to extra money or for a quick relocation. Knowing how much equity you have and how much you may be able to borrow against or sell your property for for will help you respond to any financial curveballs that life throws at you.