Real estate agents frequently provide comparative market analyses (CMAs) to guide listing prices and purchase offers. Mortgage lenders require formal appraisals performed by licensed or certified appraisers under Uniform Standards of Professional Appraisal Practice. These are not interchangeable, and the values they produce can diverge significantly.
How CMAs Are Prepared
A CMA is prepared by a licensed real estate agent or broker using sold comparables from the MLS. The agent selects comparable sales, makes informal adjustments for differences in size, condition, and features, and arrives at an estimated value range for the subject property. There are no licensing requirements specific to preparing a CMA, no standard methodology that must be followed, and no regulatory oversight of the conclusions. The CMA is a tool for negotiation and pricing, not a regulated opinion of value.
How Appraisals Are Prepared
A formal appraisal is performed by a state-licensed or state-certified appraiser under USPAP standards. The appraiser is an independent third party with no financial interest in the outcome of the transaction. They must use closed sales as comparables (not pending or listed properties), document their adjustments, and support their conclusions with paired sales analysis where available. The appraisal report is submitted to the lender and used to determine the maximum loan amount. Lenders are prohibited by federal regulation from influencing appraiser conclusions.
Why CMAs and Appraisals Diverge
- ✦Agents sometimes use pending sales or active listings as comparables; appraisers can only use closed sales
- ✦CMAs may use a wider geographic search area to find favorable sales; appraisers must justify expanding beyond the immediate neighborhood
- ✦Condition adjustments in a CMA are informal and may be optimistic; USPAP requires documented support for adjustments
- ✦Market timing: agents may price ahead of the market based on trend projections; appraisers reflect the market as of the effective date using available data
What to Tell Borrowers
When a borrower quotes a CMA-based value that is higher than the appraisal, explain that the lender uses only the appraised value to determine the maximum loan amount. A CMA of $450,000 does not help a borrower who needs the appraisal to come in at $450,000 for their loan-to-value to work. If the appraisal is low, the path forward is a reconsideration of value with additional comparable sales, a second appraisal, or a renegotiated purchase price.
Aria at vicariointel.com can walk through reconsideration of value procedures, appraisal appeal options, and how low appraisals affect different loan programs.
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