This video reviews some key concepts you need to understand when studying for the Real Estate Exam Valuation and Marketing (Appraisal) Section.
The video begins by discussing the concept of a Comparative or Competitive Market Analysis (CMA), a tool used to determine the value of a property by comparing it to similar properties in the area.
This approach, akin to the sales comparison approach used in appraisals, involves a real estate agent comparing the subject property to three active and three sold properties.
Adapting to Market Conditions:
One interesting point raised was the need to adapt to current market conditions, such as low inventory.
Maria, based near Cincinnati, Ohio, shared her experience of having to expand her search radius to find suitable comparable properties, a situation many new agents might encounter.
Explaining CMA Choices to Clients:
The video also touched on how agents can explain their choice of comparables to clients, especially when properties outside the immediate neighborhood are used. Kandyce stressed the importance of understanding market dynamics and using available properties to determine a probable sales price.
Making Adjustments in CMAs:
A significant portion of the discussion was devoted to making adjustments in CMAs. The presenters explained how to determine the value of specific features like an extra bathroom or a garage by comparing similar properties. This process involves isolating variables to find out how much a particular feature adds to or subtracts from a property's value.
The video also delves into the appraisal process. Appraisals provide an estimate of value based on specific facts at a given date, considering recent sales data.
This approach contrasts with CMAs, where agents can use a wider range of comparables, including expired listings, to suggest a listing price.
Principles of Real Estate Valuation:
Several key principles of real estate valuation, such as the principle of substitution and regression, were explained through practical examples. The principle of substitution, for instance, was highlighted through a scenario where a buyer opts for a less expensive property with similar features in a neighboring town.