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Friday, January 16, 2015

How to find a real estate sale price without a formal appraisal.

As a listing tool many real estate sales associates offer free comparative market analysis for homeowners.  The idea is to "get their foot in the door" and also disclose possible sellers and prospective listings. 

Working up a "fair price/value" takes access to real estate records and some reasonable past experience.

Before putting a home on the market or listing with a real estate agent, savvy home sellers obtain a comparative market analysis, also referred to in the industry as a CMA. Real estate agents use direct mail letters or post cards to homeowners offering free CMAs. These pitches offer you a free report to tell you how much your home is worth. Sellers use a CMA to figure out home pricing.

A comparative market analysis (called a CMA for short) is a property analysis that real estate agents use to help sellers and buyers determine the market value of real estate. A CMA is not an appraisal, but it does contain some of the same types of information that you'll find in an appraisal. While banks will not use a CMA to verify value before approving a loan, experienced real estate agents can often use the report to come very close to the dollar amount a property will ultimately fetch.
CMAs help you put a value on property for both sellers and buyers, so it's important to learn how to prepare the reports as soon as you start working as an agent. Get started by preparing a practice CMA for your own home, then get more experience by compiling CMAs for any homes or land with which you are familiar.
Although the methods differ, nearly all Multiple Listing Services offer their agents the ability to perform CMAs with the same computer software that is used to search for current and sold listings. You'll find that the software is very easy to use. Instructions included with each system will take you step-by-step through the CMA process.
What is an appraiser?
Real estate appraisals are performed by licensed appraisers — individuals who have attended school, passed an exam, and worked a certain number of hours under the supervision of an experienced appraiser to gain the skills required to offer a detailed opinion of property values. Lenders use appraisers to determine the value of homes on which they lend.
Agent CMAs are prepared by comparing the 
  • Pending Listings
    Pending sale homes are formerly active listings that are under contract. They have not yet closed, so they are not yet a comparable sale. Unless the listing agent is willing to share information about the pending sale -- and many are not -- you will not know the actual sold price until the transaction closes. However, pending sales do indicate the direction the market is moving. If your home is priced above the list price of these pending sales, you could face longer DOM.  (Days on the Market)
  • Sold Listings
    Homes that have closed within the past six months are your comparable sales. These are the sales an appraiser will use when appraising your home for the buyer, along with the pending sales (which will likely have closed by the time your home is sold). Look long and hard at the comparable sales because those are your market value.
  • Off-Market / Withdrawn / Canceled
    These are properties that were taken off the market for a variety of reasons. Usually the reason homes are removed from the market is because the prices were too high. The median prices of this group will almost always be higher than the median prices of comparable sales. However, listings cancel also for the following reasons:
  • Comparable sales are those that most closely resemble your home. It is difficult to compare a tri-level home to a single-story home. Select the homes from this list that are mostly identical to your home in size, shape and condition,

Agent CMAs are prepared by comparing the property you wish to price, called the subject property, with three or four similar properties that have sold in the recent past. You must always use the sales price of sold properties when doing a CMA. This is the data that an appraiser will use when a potential buyer is looking for a loan. Property does not sell based on the prices of sold properties alone — supply and demand is also a factor.
You will also need to compare the subject property to other properties that are currently available to see how it stacks up against the competition.
The more details you have about the subject property, the easier it is to prepare a CMA. You should know:
  • Location and year built
  • The total acreage or lot size
  • The number of and types of rooms
  • Structural details, such as insulated versus single-pane windows, type of heat and air conditioning, size and type of garage, basement, fireplace, etc.
  • Facts about components, such as the types of flooring installed Overall condition of the structure and its components
  • Style
  • Similar amenities, upgrades and condition
    Appraisers will deduct value from your home if other homes have upgrades and yours does not. A home with a swimming pool will have a different value than a home without a pool. A completely remodeled home is worth more than a fixer. Homes with one bath are worth less than homes with two or more baths. Deferred maintenance will count against you.
  • Location
    Everybody knows that real estate is valued on "location, location, location," but have you considered what that means? A home with a view of the city, for example, is worth more than a home facing a cement wall. Homes located on busy thoroughfares are worth considerably less than homes on quiet streets. Compare your home to those in similar locations. If your home sits across the street from a power plant, look for other homes with power plant exposure or those located along railroad tracks, among other undesirable locations.
Think in these terms, four things sell houses.  
Price (adjustable) Terms (low down payment, non qualifying contract/mortgage)  Condition (remodeled or "as is")  
Location (sorry, it's where it is)

Insert a statement within your CMA that confirms it is a comparative market analysis and not a certified appraisal. States that require that type of disclosure furnish agents with the specific wording to be used. But, play it safe, make a disclosure, required or not.