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 homes that have recently sold and are as similar to and located as close to the home being valued as possible. Each one 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 a Professional’s Opinion

An appraisal is an unbiased valuation of a home conducted by a licensed professional, typically used by mortgage companies for home purchases and refinances. The lender usually orders the appraisal, which is paid for by the homeowner. During the process, the appraiser conducts a thorough visual inspection of the interior and exterior of the home, considering recent sales of similar properties and current market trends. The result is a detailed report that includes an exterior building sketch, a street map showing the home and comparable sales, photos of the property and surrounding area, an explanation of how the square footage was calculated, and any other relevant details.

REFINANCING

Lenders determine the loan amount based on your property’s value, typically allowing you to borrow up to 96.5% of its worth. Understanding your home’s value helps lenders calculate your equity, which plays a crucial role in securing favorable terms for your refinance. The more equity you have, the better the terms you are likely to receive.

HOME IMPROVEMENTS

If you are investing in home improvements to boost resale value, it is important to avoid pricing your home out of the market. If your property is already at the higher end for your neighborhood, excessive upgrades could make it harder to sell. A valuation allows you to see how your home compares to others nearby, helping you make informed decisions about which improvements will yield the best return without overpricing your home.

QUALIFYING FOR CREDIT

If you are considering borrowing cash against your home, a Home Equity Line of Credit (HELOC) is a viable option. To qualify, most lenders require you to have at least 20% equity in your home. A home valuation will help you determine if you meet this requirement. It is used by the lender to make a decision on your loan.

PLANNING

While not essential, knowing your home’s value is useful information. It helps you plan for the future and prepare for unexpected situations, such as the need for additional funds or a quick relocation. Understanding how much equity you have and how much you could potentially borrow against or sell your home for will enable you to respond effectively to any financial challenges life may present.