Appraisals

An appraisal is an estimate of a property’s value by an appraiser who is usually presumed to be an

expert in his/her work.

An appraisal is specific to a certain date in time.

An appraisal may be used to help determine the market value of a property.

Residential properties are typically appraised using the sales comparison approach.

Comparative Market Analysis (CMA)

A CMA is a property evaluation that determines property value by comparing other properties
currently on the market, properties that have recently sold, and expired listings.

In other words, a CMA is an analysis of the competition in the marketplace that a property will face
upon sale attempts.

A CMA is NOT an appraisal. Instead, it is an opinion of value.

A CMA is typically prepared by a real estate agent.

Residential Market Analysis

Residential market analysis is a study of the property being listed.

The analysis views the property in light of the conditions in the marketplace.

These conditions determine how the agent should market the property.

A residential market analysis will analyze the following:

1) Recently sold properties

2) Current competing properties

3) Recently expired properties

4) Buyer appeal

5) Market position

6) Positives and negatives of the property being marketed

7) Area market conditions

8) Recommended terms

9) Market value range

Market Value

Market value is the most probable price that a property should bring if exposed for sale in the open
market for a reasonable period of time, with both the buyer and seller aware of current market
conditions, neither being under duress.

Market value applies to an “arm’s length transaction”.

Also known as ‘Fair Market Value’.

Market value is driven by supply and demand in the competitive marketplace.

Market Price

Market price refers to the actual selling price of a property.

Remember: market value is the probable price, while market price is the actual selling price.

Direct vs Indirect Costs

There are two types of costs associated with construction:

1) Direct costs: also known as hard costs, they include the cost of labor and materials.

2) Indirect costs: costs that create and support the project. These include architectural and
engineering fees, attorney fees, and financing costs, among others.

Obsolescence

One of the causes of depreciation. It is the loss of desirability and usefulness caused by new
inventions, changes in design, and improved processes for production, or from the influence of
external factors. Obsolescence may be either economic or functional.

Functional Obsolescence can be an outdated design or floor plan.