Property Valuation
In Michigan, a 'competitive market analysis' (CMA) performed by a real estate agent differs from an appraisal because:
AA CMA is always more accurate than an appraisal
BA CMA is prepared by a licensee to estimate list or offer price, while an appraisal is prepared by a licensed appraiser for lending and legal purposes✓ Correct
CA CMA is legally required by LARA for all listings
DOnly a CMA may be used by a court in valuation disputes
Explanation
A CMA is an informal estimate prepared by a licensee using comparable sales to assist buyers or sellers in pricing decisions. An appraisal is a formal, independent estimate of value prepared by a state-licensed or certified appraiser for lending or legal purposes.
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Key Terms to Know
Appraisal
A professional estimate of a property's market value prepared by a licensed or certified appraiser.
Comparable Sales (Comps)Recently sold properties similar in size, condition, and location used by appraisers and agents to estimate a property's market value.
Capitalization Rate (Cap Rate)A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.
Gross Rent Multiplier (GRM)A quick valuation metric for income properties calculated by dividing the property price by gross annual rental income.
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