Stanley Combs

One might say that if we can use a Competitive Market Analysis to price a house, then why must we pay for an appraisal in order to get a loan? Good question. There are, of course, several differences in the two. The CMA is a "ballpark" figure, and the appraisal involves a more stringent process to prepare the report.

The appraisal is a five step process: (1) define the problem, (2) determine the scope of work, (3) collect, verify and analyze all relevant information, (4) reconcile the information analyzed and (5)report results. Numbers one, two and five are fairly selfexplanatory. It's the number three that really starts to separate the two processes.

As an example, the appraiser gathers information about social, economic, physical and/or governmental forces that impact the value of properties. Included would be a "sales comparison approach" and a "cost approach."

The sales comparison approach is very similar to a CMA; however, it is more sophisticated in its approach and outcomes. The cost approach gets into the replacement of improvements and depreciation and then adds the value of the land plus its preparation.

As you can see, the appraisal is a lot more detailed than the CMA. While we can rely on a CMA for a good estimate of the property value, it is not enough information to provide the basis for a loan

Stanley Combs is a realtor with Keller Williams Realty, and can be reached at (805) 3832948 or (805) 794-3363.