How Much is your Property Really Worth?
Comparable Market Analysis, Appraisals and Lenders

Many people fail to order an Appraisal Report to establish an offering price (Seller) or to substantiate a purchase price (Buyer).

An appraisal is a reliable estimate of value used to determine an offering price. A seller should consider ordering an appraisal before listing the property. The cost of the appraisal sometimes becomes a deterrent, especially if the seller knows that a buyer will pay for one when applying for a loan. Without an appraisal a seller could lose a sale for the following reasons:

•	The property appraised for less than the sale price when appraised by the lender's or buyer's appraiser
•	The appraiser identified a problem that could have been solved before the sale
•	The property will not qualify for the type of loan indicated on the contract, allowing the buyer to back out of the deal

Buyers applying for a loan are very often only interested in obtaining the loan and are not too concerned about the prudence of buying the property at the agreed price. Some buyers attempt to encourage appraisers to increase the appraised value so they can purchase the home regardless of its value.

Lenders request the majority of real estate appraisals to establish the property's value for loan purposes. Excluding periods of very low interest rates when many owners are refinancing, most loans are for the purchase of real estate. Most appraisals are ordered after a sale price is negotiated. Purchasers assume that lenders are looking after their interests, but are they?

The appraiser is responsible only to the bank, if the lender orders the appraisal. Law requires that the lender order the appraisal and the lender must be the client. Lenders are expected to be prudent, but being prudent is protecting their interest, not necessarily the purchaser's.

The real estate agent will typically perform a Comparative Market Analysis (CMA). The appraisal laws in most states allow real estate agents to perform CMAs without an appraiser's license or certification. A CMA is an important part of an agent's preparation for a listing and consists of examining sales of properties in the area to arrive at a listing price. The reliability of the CMA depends upon the agent's experience and the characteristics of the property. The agent will suggest a selling price to the seller based upon the analysis. Neither the seller or agent are bound by the results of the analysis. The agent is not required to follow any formal procedure in completing the CMA.

If a seller wishes to list the property at a price higher than the price suggested by the agent, the overpriced property may "sit on the market" without any offers. Ultimately the asking price is reduced to effect a sale. Every seller wishes to obtain the highest price possible and every buyer wishes to pay the lowest price possible. Remember, it's the art of negotiating that will benefit you most.