MARKET ANALYSIS

Comparative Market Analysis

A Comparative Market Analysis (CMA) is a professional tool real estate agents use to estimate a home’s market value. It involves analyzing recently sold properties—known as comparables or comps—that are similar in size, condition, location, and features to the subject property. Typically, an agent identifies at least three comparable homes that have sold nearby within a recent timeframe. Each comparable sale is then carefully evaluated, and adjustments are made for any differences, such as lot size, number of bedrooms, updates, or amenities. These adjustments help determine what each comparable home would have sold for if it were identical to the subject property in today’s market. This type of analysis results in a well-supported estimate of the home’s current market value.

APPRAISALS

Based on a Professional Appraisal Report

A Professional Appraisal Report provides an unbiased estimate of a home’s value, prepared by a licensed appraiser. Mortgage lenders typically require an appraisal when a home is being purchased or refinanced. The lender orders the appraisal, but the cost is paid by the buyer or homeowner. The appraiser conducts a thorough visual inspection of both the interior and exterior of the home and considers recent sales of comparable properties, along with current market trends. The findings are compiled into a detailed written report that includes an overall building square footage sketch, a street map showing the property and comparable sales, photos of the home and surrounding area, an explanation of how the square footage was calculated, and other relevant details that support the appraiser’s valuation.

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 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 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 home 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 home 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 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

Although it’s not a necessity, knowing your home’s value is important for many reasons. It can help you plan for the future and prepare for unexpected situations, such as needing extra funds or relocating quickly. Understanding how much equity you have—and what you could borrow against your home or how well it would sell in the current market—enables you to respond wisely to any financial curveballs life may throw your way.