Difference between appraisal and CMA

The difference between an appraisal and a home evaluation or CMA

There are several differences between an appraisal and a home evaluation, apart from that the appraisal cost a few hundred dollars, and the home evaluation from the realtor is free. The realtor creates the home evaluation, also known as the CMA, the Comparative Market Analysis. The appraiser does the appraisal and creates an appraisal report. This CMA is only for the purpose of selling, the appraisal is for many different purposes, including selling.

When to ask a realtor for a home evaluation

You could say the realtor’s CMA is an opinion of value, which is open for discussion and interpretation. A realtor is allowed to do a CMA, a Comparative Market Analysis, only for the purpose of selling the home. Also, the realtor must give a range of value, such as “your home should sell for between $520,000 and $540,000”. A CMA helps to set a listing price for a home, which can be influenced, for example, by a seller’s motivation. The conclusion from the realtor’s opinion only becomes clear when the home sells, and market determined final sale price, based on demand and supply.

A CMA from a realtor can not be used for things like refinancing, income taxes, divorce settlements or any other civil proceeding etc. In these situations, the evaluations must comply with particular standards that only licensed appraisers are allowed to perform. The RECA, the Real Estate Council of Alberta sets these standards.

When to use an appraiser

The easy way to explain the purpose of an appraiser is that the appraiser is independent, unbiased and impartial in determining the value of a property. The reports of appraisers are very extensive and detailed, and the reports clearly indicate the purpose of the appraisal. An appraiser is allowed to set a defined value for a property: “This property is valued at $500,000”.

A report from a licensed appraiser can be used for many purposes:

• Buying or selling property. Also for private sales.
• When you want to renovate or build a property.
• For (re)financing a property.
• But also for tax purposes the appraiser steps in.
• Or in case of insurance claims. Think of fire damage.
• You could use an appraisal to fight your property taxes.
• In cases of divorce, where a spouse ‘buys’ out the other.
• In family matters such as inheritances with real estate involved.
• When the city buys your property for the purpose of a public construction
• Or when your home loses value caused by a government decision to build something.
• In cases of expropriation.

This is not a full list of the purpose of an appraiser, but it gives a fair idea of when an appraiser steps in over a realtor.

If you buy a property, banks and other mortgage lenders hire an appraiser. Lenders need to make sure that the money they lend is not more than the value of the property. It is clear that a bank will never rely on a CMA of a realtor. The same goes for the CRA, or for civil cases such as a divorce settlement. No lawyer will accept a realtor’s CMA to determine who gets what in divorce.

Difference in education between an appraiser and realtor

The education of an appraiser goes well beyond a realtor’s education when it comes to evaluations.  The appraiser in Alberta has a minimum of 2 to 3 years of education, depending on the type of program. The appraiser is allowed to do an evaluation for all kinds of purposes. The realtor has the education to do an evaluation for only one purpose: selling the property. The entire education to become a realtor in Alberta takes about 3 months and includes very little about learning to do evaluations. It is field experience that teaches realtors to do evaluations properly.

Both a realtor and an appraiser are licensed

Reca is the licensing body in Alberta for both appraisers and realtors. The RECA is very clear and strict about what a realtor is allowed, when it comes to evaluations of a property. Every CMA of a realtor must clearly note that it is not an appraisal, and it cannot be used as such. A realtor is not allowed to do a home evaluation for the purpose of a divorce settlement, a private sale, the CRA, re-financing or anything other than selling.

The cost of a CMA vs an appraisal

Every other bus bench in Calgary says it: free home evaluation. Yes, every realtor in Calgary offers a home evaluation for nada, zero, free. The fact is that a realtor is not allowed to charge for a home evaluation. Yet, creating a good CMA takes on average 3 to 6 hours. Any such work ahead of listing a property will be absorbed in the commission you pay when you sell.

Often realtors are approached for a free home evaluation for the purpose of refinancing, or for a divorce settlement, etc. Again, realtors are not allowed to do CMA’s for any other purpose then selling. This rule is defined by RECA. In our opinion, if a realtor does offer a CMA for any of those appraising reasons, you may have found a desperate realtor who wants a foot in the door, hoping s/he will get to sell your home down the road. Be aware because realtors may have different moral standards, and for sure have a lot less education.

Appraisals in Calgary are very inexpensive and will cost a few hundred dollars. To find an appraiser in Calgary visit https://www.aicanada.ca/

We do offer sale prices of homes in your Calgary community. This monthly report gives you list price, selling price, number of days on the market and more. It is a great way to stay up to date about your community! Visit sold prices in Calgary to sign up for a monthly update!

The above information is general information. It is not meant to be legal advice upon which anyone may rely. Should you have questions about a property or a specific transaction, please contact counsel for definitive advice.