Whether you’re shopping for a home or wondering what your current home is worth, you might get caught up in the various terms used to describe the value of a property and the methods used to determine that value. Should you go by the list price, the home appraisal, a comparative market analysis, or something else?
In this guide, REMAX experts weigh in on two important valuation tools: the home appraisal and the current market assessment (often called a comparative market analysis, or CMA). Learn what makes them different, and what each one means for your home purchase.
Key Takeaways
- A home appraisal is a formal valuation used by lenders, while a CMA is an agent-prepared estimate of market price.
- Appraisals are typically more conservative and standardized, while CMAs reflect real-time market conditions.
- Market value is determined by buyer demand and seller expectations, not just valuation tools.
- Low appraisals can impact deals, requiring negotiation or additional cash from the buyer.
- Municipal assessments (CVA) are not reliable indicators of current market value and should not be used for pricing decisions.
What Is a Home Appraisal?
A home appraisal is a formal assessment of a property’s value, conducted by a licensed appraiser who is a third party to the transaction.
Lenders require appraisals as part of the mortgage approval process to ensure that the property is worth at least the amount they’re lending you and that it will hold its value. This protects the lender by giving them confidence that they’ll be able to recover the appraised value if you default on your mortgage.
During a home appraisal, the appraiser visits the property, evaluates its size, condition, features, and location, and then compares it to comparable homes (“comps”) that have sold nearby within the last few months. The appraiser delivers a detailed written report to the lender, and buyers can also request a copy.
How Much Does a Home Appraisal Cost?
Home appraisal cost is usually between $300 and $600 for a standard residential property, but it can be higher for larger homes, multi-unit residential properties, or rural properties.
In most cases, the lender chooses the appraiser, and the buyer pays for the service as part of the closing costs. Occasionally, sellers arrange for an appraisal before they list the property to help determine an appropriate market list price, but this is separate from the appraisal the lender orders.
What Is a Comparative Market Analysis?
A comparative market analysis (CMA) is an assessment of a property’s value prepared by a real estate agent. Rather than producing a formal home appraisal report, the agent analyzes recent sales of similar properties in the area to determine a reasonable price for the property, given current market conditions. The agent will typically look at:
- Recent sales of comparable homes in the neighbourhood (similar size, age, features, and condition).
- Active listings that show your current competition.
- Expired listings, which can indicate where pricing went wrong.
- Current market conditions, including whether it’s a buyers’ or sellers’ market in your area.
CMAs are used primarily in two situations: by sellers who want to set an appropriate list price, and by buyers who want to know if a home is priced fairly before making an offer.
Appraisal vs. Comparative Market Analysis
The main difference between a home appraisal and a CMA is that the appraisal protects the bank by ensuring that the home is worth what they’re lending out for it, and the CMA protects the buyer by making sure they don’t overpay for a home.
Appraisals also tend to be more conservative, relying strictly on objective factors and adhering to professional methodologies and standards. A CMA also uses comparable sales data, but incorporates an agent’s on-the-ground knowledge of the local market, including buyer demand and details about what’s happening in the immediate neighbourhood.
Bank Appraisal vs. Market Value
Market value is what a buyer is willing to pay, and a seller is willing to accept on the open market. Market value is determined by competition for the property, the timing of the transaction, the buyer’s motivation to purchase the property, and the seller’s eagerness to sell. In a seller’s market, competitive bidding can push a sale price above both the appraised value and the CMA estimate.
None of these values (appraised, CMA-based, or market) are incorrect: they just answer different questions. The appraisal tells the bank what the property is worth as collateral. The CMA tells you what it’s likely to sell for, and the market value is what actually happens when the buyer and the seller come to an agreement on the sale price.
What Happens When the Appraisal Comes in Low?
If the home appraisal comes in lower than the purchase price in the offer, the buyer has three options:
- Make up the difference in cash in the form of a larger down payment.
- Negotiate the purchase price down.
- Dispute the appraisal if there are inaccuracies.
The third option takes time and isn’t always successful, but it’s one reason to request a copy of the appraisal report and review the comparables carefully.
The best way to avoid this situation is to work with your real estate agent to review the comps before making an offer. If you decide to offer above what comparable homes have sold for, go in knowing you may need to bring more cash to the table.
What Is a Current Value Assessment?
A property’s current value assessment (CVA) is the value assigned by your municipality for property tax purposes. Municipal assessments often lag behind real market conditions, and they use a different methodology altogether. Your CVA is worth knowing, but it’s not a reliable indicator of what your home would sell for or what size loan your lender would approve for it.
Bank Appraisal vs. CMA vs. Market Value vs. CVA
The table below compares the four methods of property valuation discussed in this guide.
| Home Appraisal | CMA | Market Value | CVA | |
|---|---|---|---|---|
| What It Is | Formal property valuation | Agent-prepared estimate of likely sale price | What a buyer will pay and what a seller will accept | Assessed value for tax purposes |
| Who Produces It | Licensed appraiser | Real estate agent | Determined by the market | Provincial authority |
| Purpose | Protect the lender | Helps buyers and sellers price accurately | Reflects real-world market conditions | Municipal government |
| Based On | Comparable sales and professional methodology | Comparable sales and the agent’s market knowledge | Supply, demand, competition, timing | Periodic mass assessment |
| Cost | $300 to $600 | Free | N/A | N/A |
FAQ
- What is the difference between a home appraisal and a CMA?
A home appraisal is a formal valuation conducted by a licensed appraiser, typically required by a lender. A comparative market analysis (CMA) is an estimate prepared by a real estate agent based on recent comparable sales and local market conditions. - Which is more accurate: an appraisal or a CMA?
They serve different purposes, so accuracy depends on the context. Appraisals are more conservative and standardized, while CMAs reflect current market conditions and buyer/seller behaviour. They answer different questions, but together provide a picture of a property’s value. - Who pays for a home appraisal?
Although the lender chooses the appraiser, the buyer typically pays for the appraisal as part of their closing costs. - What happens if a home appraises for less than the purchase price?
If the appraisal comes in low, the buyer can negotiate the price, make up the difference in cash, or attempt to dispute the appraisal. - Is market value the same as appraised value?
No. Appraised value is an estimate used by lenders to protect their investment, while market value is the price a buyer is willing to pay and a seller is willing to accept. In competitive markets, the final sale price can exceed both the appraisal and CMA estimates.
