CMA’s vs. appraisals

Market Value

Your home’s market value is equally important to buyers, sellers, lenders and real estate professionals.Establishing a home’s market value is equally important to buyers, sellers, lenders and real estate professionals so that transactions can proceed quickly and efficiently. A real estate professional may prepare a comparative or comprehensive market
analysis (CMA) for their sellers to help them choose a listing price. The CMA includes recently sold homes and homes for sale in the seller’s neighborhood that are most similar to the seller’s home in appearance, features, and general price range.

Home Value
Although the CMA is used to help determine current market value, it does not establish the seller’s home value. In fact, the seller’s home is typically not even featured in the CMA. The CMA is merely a guide to help the seller learn what’s happening in their local market, so they can better understand where their home fits in term of price ranges, based on location,
features and condition. Once the home is listed on the open market, a buyer makes an offer, usually based in part on a CMA the buyer’s agent has prepared. CMAs can help buyers better understand the local market as well as sellers. If the buyer is receiving financing through a bank, the bank will order an appraisal. Unlike the CMA, a bank appraisal is a professional determination of a home’s value. It’s performed by a licensed appraiser, using guidelines established by the Federal Housing Finance Agency, which regulates federal housing loan guarantors such as FHA, VA and housing loan purchasers Fannie Mae and Freddie Mac.

Appraisal
An appraisal is a comprehensive look at a home’s location, condition, and eligibility for federal guarantees. For example, a home that doesn’t meet safety requirements such as handrails on steps will not be eligible for FHA or VA loans until the handrail is installed or repaired. Appraisers use the same data in their market research to find comparable homes as REALTORS® do. They are also members of the MLS, but they also have additional guidelines from the bank to follow that minimize risk to the bank. They may take off value for slow-moving markets, or markets with high rates of foreclosures. If prices are falling, the appraiser takes the number of days a home has been on the market far more conservatively.
When the appraisal is finished, the bank makes the decision to fund the loan, or it may require the seller to fix certain items and show proof that the repairs have been made before letting the loan proceed. If the loan doesn’t meet lending guidelines, the bank will decline the loan. Despite stricter lending and appraisal standards, most buyers’ loan applications go through to closing – nearly 85 percent. One reason for that is that real estate agents are preparing CMAs that are better tuned to lending standards, for sellers and buyers to better understand not only what the market is doing, but how much lenders are
willing to finance.

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How comparable market reports can vary

Whether you are buying or selling a home, your real estate professional can give you a snapshot of the local market known as the competitive or comparative market analysis or CMA.
A CMA helps the seller choose a listing price and the buyer to make an offer. CMAs are generated from multiple listing service data. They’re convenient reports that help sellers choose a listing price and buyers to make offers on a given home.

CMAs vary greatly depending on the search parameters that are input by the real estate
professional, by type of home (detached vs. attached), zip code or by street, number of bedrooms, baths and living areas, square footage, and numerous other search criteria.
They also tell you which homes have recently sold – six months, three months, one month, and which homes are currently on the market in the area and price range
you’re interested in.

As many fields of information as there are, some criteria simply can’t be listed in a CMA.
If the MLS has a field for “ocean views,” you’ll know. But if not, you’ll have to learn more in the remarks section that is filled in by the listing agent. There you
might find “great views.” But who is to say what makes a great view?

CMAs results may vary even between identical homes. One property may simply offer better drive-up appeal or is in better condition than the other, and that will be reflected in the sales price. Last, buyer and seller motivation can’t be quantified. You don’t know why a seller agreed to take less for their home or why a buyer paid more for another home. Family problems, corporate relocations and other reasons all play a role. What you can learn from the CMA is how long the home took to sell. If it was quick, the seller was highly motivated. If it didn’t, it was probably overpriced.

CMAs are Tools
For these reasons, CMAs are not home valuations. They are tools to use alongside your real estate professional’s knowledge of the market. They may have house-to-house knowledge of the market and be able to tell you why they think one home sold for more than another.

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Negotiating with buyers

Sellers today have to do more to attract buyers and offers than ever before. When offers come in,sometimes they are low or have conditions that have to be negotiated. As a seller, you can be proactive before the offers come in to make sure negotiations are kept to a minimum and in your favor.

Negotiate by planning ahead

Before you begin negotiations with any buyer, make sure you have the upper hand by removing any sticking points in advance. Price your home to sell at or below current market
comparables and you’ll more likely receive serious offers close to your asking price. Put your home in spotless move-in condition, with no visible repairs
needed. De-clutter your home, deep clean it, paint it and repair it, and keep it “show-ready” every day it’s on the market. Get your home inspected so you know where issues are and can correct them before they become negotiating points that cost you money. Buyers respond well to fair pricing and a “model home” appearance. Your buyer has less to negotiate,
and will more likely make an offer closer to asking price.

When the offer comes in Buyers sometimes test sellers with low offers, but don’t get upset or discouraged. If the offer is too low, simply have your agent return the offer with a copy of recent comparables to show that your home is priced fairly at current market value. They will get the message, and either come back with a reasonable offer, or move on to another home. If the offer is low, but close to what you want, study the terms carefully, adding up possible expenses such as paying the buyer’s closing costs. Ask for the buyer’s reasoning behind the offer to give you insight into the buyer’s mindset. Could the buyer be trying to buy more house than he or she can afford? Could a change of financing help get closer to your price? Can you afford to help with the buyer’s closing costs if he or she will raise the offer price?

Before you agree, make sure the buyer is preapproved with a lender and working with a real estate professional. Serious buyers have access to the same comparables as you do, so a buyer working with areal estate professional is more likely to be preapproved by a lender and informed of current market conditions. A full price offer doesn’t mean negotiations are over. It could signal that the buyer intends to negotiate a lot of repairs or refurbishing costs during the inspection period. Stay calm and reasonable.

If you’ve done your homework – priced and prepared your home for the highest, best offer, your home will sell at a fair price.

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Selling in a tough market

When home prices fall, supplies of homes for sale increase, and buyers become more demanding, it’s a buyer’s market. That doesn’t mean you can’t sell your home for a fair price. You just have to work harder to make it happen.

A real estate professional can give you an accurate overview of the market.A buyer’s market is not the time to represent yourself. It may be tempting to recoup some equityby not paying a real estate agent, but you’ll losemore than you’ll gain. A real estate professional can
give you an accurate overview of the market, helpyou with strategies, and bring offers from qualified buyers.

In a buyer’s market, only location and condition can move buyers to pay more for any home. You can’t do anything about location, but you can take condition
out of the equation. There’s a huge difference between a home that “doesn’t need a thing” and a home that “needs work.” Show pride of ownership by putting your home in top move-in condition so that your home is more appealing to buyers than any other home in your price range.

You can expect lowball offers in a buyer’s market, but homes that are priced fairly and in pristine condition will be treated with more respect by buyers.Pricing according to recent sold comparables might not be as smart as pricing to pending sales – those yet to close. You have to know what your bottom line is, but pricing your home should have nothing to do with how much you owe creditors, how much cash you need to buy your next home or how much you need for your retirement or any other reason. Buyers will only pay current or pending market value as determined by the most recent comparables.

Negotiation is a fine art, and typically works best when both parties get what they want. For example, you may be willing to take less money in exchange for a cash offer or a quicker closing. Your buyer may be willing to pay your asking price, but they may ask you to pay their closing costs. You’ll quickly realize if you’re dealing with a sincere buyer. Respond to the buyer’s negotiations with documentation, receipts and other information in a timely manner. If you feel the buyer isn’t negotiating in good faith, simply stop negotiations. You’re under no obligation to respond to an unreasonable offer. The buyer will get the message. Buyer’s markets work for sellers, too. Keep in mind that when you buy your next home, you’ll
be able to take advantage of falling prices, too. Think about the future – that you can repurchase more home for less money next time. It all evens out.

Find out what your home is worth fast & FREE – no cost, no obligation right here.
Francine Gregory | F. Gregory Estates | Office: 916-800-3726

2572 21st Street Sacramento CA 95818
SOLD@fgregoryestates.com
916.800.3726

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