Appraisal or Competitive Market Analysis (CMA)?

There is a lot of negative commentary in social media and in the press related to what appraisals are and what appraisers do. Much of it seems to stem from a misunderstanding of the appraisal process. I just saw a YouTube video an agent put together disparaging appraisals from the pre-listing perspective, and instead advocating for the use of agent’s market analysis.  Both appraisal and CMAs are valid, as they have different functions, and it makes no sense to disparage one to try and sell the other. 


In order to help dispel some myths that cause this type of misunderstanding, consider what an appraisal is, and what a CMA is, and how both are useful in the prelisting process.


From the Uniform Standards of Professional Appraisal Practice (USPAP) definitions section:

APPRAISAL: (noun) the act or process of developing an opinion of value; an opinion of value. (adjective) of or pertaining to appraising and related functions such as appraisal practice or appraisal services.

Comment: An appraisal must be numerically expressed as a specific amount, as a range of numbers, or as a relationship (e.g., not more than, not less than) to a previous value opinion or numerical benchmark (e.g., assessed value, collateral value).

REPORT: any communication, written or oral, of an appraisal or appraisal review that is transmitted to the client or a party authorized by the client upon completion of an assignment.

APPRAISER: one who is expected to perform valuation services competently and in a manner that is independent, impartial, and objective.

Comment: Such expectation occurs when individuals, either by choice or by requirement placed upon them or upon the service they provide by law, regulation, or agreement with the client or intended users, represent that they comply.


Looking at these definitions, an appraisal relates to the development of the opinion of value, while the report is the communication of that opinion. Most of what the public sees is the report, not the act of development.


The definition of appraiser is particularly important as this is one who is expected to perform competently, independently, impartially and objectively. Why would there be any objection at all to someone who is performing this work in such a manner as the definition of an appraiser implies?  The appraisal report should, by its very definition, end up being an unbiased opinion. I will add that the opinion is based on factual data that is observed, analyzed, and reported in a competent manner. Because of that, it is very important that data that is provided to the MLS and public records be reported accurately, as both agents and appraisers will need to rely on what is reported to a large extent.


A competitive market analysis (CMA) is the REALTORs study of the market and the subject properties position in the market. Most agents use similar data sources that the appraisers use, but tend to focus more on the active properties as compared to the sold properties in establishing an asking price.  This makes sense because the buyer is not going to have the opportunity to buy one of the comparable sales that are used in an appraisal report, since they already sold. They could buy one of the active alternatives. In that manner, this is a logical approach.  One concern with it however, is that the appraisal will need to at least meet the sales price once the property goes to contract, therefore studying the past sales is paramount as well.


Ideally both appraisals and CMAs consider both the past and the present, as well as the current market tone and activity. Appraisers look to most probable sales price, while agents will try and focus on the highest possible price for their client.  Often sellers will have two or more CMAs for their property completed as part of the various listing presentations, as agents vie for a listing. Sometimes the agent’s CMAs are not close together at all, and the owner needs an independent opinion, which is where many appraisals for pre-listing information come into play. Sometimes sellers are simply more comfortable hiring an appraiser to provide them an opinion outside of the listing process, to ensure they do not significantly overprice their property.  This too makes sense. Spending a little bit of money prior to listing, could save substantial time and heartache if the property does not sell and is marketed an extended time. Or it could do the same if it does sell, but cannot be supported by closed sales in the market. Many sellers look at the appraisal report as an ounce of protection being worth more than a pound of cure.


Both appraisals and CMAs have a place in the process of listing a property for sale. Homeowners should carefully review an appraiser’s experience, qualifications and knowledge of the market, as well as that of any agent they hire.  After all, both appraisers and agents will work a market extensively, whereas a seller (or buyer) will only occasionally participate in the real estate market.