What is an appraisal?
A real estate appraisal is the process of determining value for real property by a licensed appraiser.
What is a CMA?
A Comparative Market Analysis (CMA) is an analysis prepared by a real estate agent for their clients to help a seller determine a price to list when selling their home and to help a buyer determine a price to offer when buying a home.
What is a BPO?
A Broker’s Price Option (BPO) is an estimate of a home’s value determined by a real estate broker.
How do appraisers determine the value for real property?
Appraisers use data and comparable sales (comps) to determine the value for real property. Typically, they select the most similar comps to the subject property and use this value as the appraised value.
What makes up a comparable sale (comp)?
Comparable sales are the sales prices of similar homes that have sold. Some of the main components that determine a comp are timeframe, proximity, square footage, age, and condition of home.
What guidelines do appraisers follow when selecting comparable sales?
Appraisers follow several guidelines when choosing comps. Below are just a few factors that go into selecting comps for an appraisal. Ultimately, an appraiser should use the most competitive sales available.
Number of Comps: An appraiser must use at least 3 or more settled sales as comps.
Time: An appraiser must use comps that have sold within the past 12 months. However, an underwriter for a loan, prefers to see comps that have sold with the past 3-6 months.
Distance: An appraiser can go as far as necessary to pull a comp, but typically, appraisers stay within a one-mile of the subject property to determine value.
What is the difference between a CMA, BPO, and an appraisal?
A CMA and BPO are prepared by agents for their clients to show market activity and determine a price range for value. An appraisal is prepared by an appraiser and attaches a price to a home.
Who pays for the appraisal?
Typically, in a real estate transaction a buyer pays for the appraisal, but the appraisal is done for the lender. However, prior to going to market, a seller can order a pre appraisal inspection or letter of opinion to help determine value.
How much do appraisals cost?
Appraisals typically average around $500+/- and are part of a buyers closing costs.
How are appraisers selected?
A buyer’s lender orders the appraisal. Lenders either have an in-house or a third-party appraisal management company that they use to select appraisers. Either way appraisers are selected on a rotational basis.