Valuation Reports: What They Are and How to Read Them

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By Semya-Moya Updated October 22, 2021


Valuation reports can seem technical to the average buyer or seller, but provide lots of concrete data. When looking at these reports, it’s important to consider how the information applies to your situation. An experienced local agent can break it down for you.

Valuation Reports: What They Are and How to Read Them

As more people are priced out of the housing market this year, part of the reason this happens is that both buyers and sellers look at the current state rather than overall trends. Valuation reports allow sellers to price for what the market can bear and helps buyers to make more realistic choices. Working with an experienced local agent from Clever allows you to have access to a free CMA or valuation report along with someone who can break it down for you.

Here is what you can expect from these reports and how they help both buyers and sellers.

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How is a Property Valuation Report Created?

The value of a property can seem random, but there are some reliable and well-trusted factors that go into setting the value of any property. One way to value a property is to look at comparable homes that are sold and bought near the area. Another is to create an appraisal based on the location, amenities, structural condition, and all the recent sales in the region.

Realtors provide accurate valuation reports using comparable homes and the help of the MLS. Both sellers and buyers have access to a Comparative Market Analysis through buyers. Clever Partner agents provide this to their clients with no strings attached.

These reports include active, pending, and sold listings to give a wide breadth of the market not just for that month or season. They got access to off-market data, which helps them to find the highest price a home can be listed at without losing its ability to compete on the market.

Realtors take into account the general details of the size, age, and features of the home. They also look at amenities and public resources to provide a price to sellers.

How to Read One

Valuation reports or CMAs can be a short list of comparable homes to a guide that goes on for 50 pages in comprehensive details about how the home is valued and why.

The active listings in the report are the homes are on the market at the moment the report is created. For sellers, this is what you will be competing with. They don’t really entail market value, since sellers can price their home at whatever they want.

The pending listings were recently active but are under contract. What’s on the market differs from what people are currently looking for and putting their money down on. However, the actual sale price isn’t going to be listed until the transaction is over.

That’s why sold listings are part of the CMA. These properties have been appraised by a professional appraiser and given a value that the buyer and seller then either haggled over and agreed to. It might take looking at six months of sold listings to come up with a number that works for you.

CMA reports also include the sales that are withdrawn or canceled. This happens for several reasons, including sellers who change their mind about selling, homes that were priced too high and got no offers, or deals that fell through after inspection. If a seller fires an agent who doesn’t bring in a sale, this could be why a property was withdrawn.

What a Valuation Report Provides for a Buyer

Buyers want to see valuation reports so they can have their own way of managing their expectations. Valuation reports help buyers to see potential improvements necessary and let them plan on how far their dollars will go in the market.

A CMA will list the amenities of the home so that buyers can correlate the price with how many bathrooms it has, what appliances there are, or whether there’s a garage. The CMA will sometimes shed light on what additional upgrades there are.

Buyers usually come to the table with a soft limit of how much they want to spend and a hard limit of how much they can afford to spend. The valuation report helps to provide a realistic view for buyers. If they see a home that’s priced too high, they also get to imagine that it could take a long time to negotiate with the seller.

Even with an experienced local agent in your corner, it’s much more appealing to buyers for the process to go quickly without so much back and forth.

How it Differs From an Appraisal

Before a buyer can secure funding from most lending institutions, lenders will usually require potential buyers to seek an appraisal. This helps lenders to get a real figure as to how much they’re willing to lend on a property. If a lender offers $200,000 for a property that’s only worth $100,000 and then the buyer defaults, they’re left with a $100,000 loss.

The Valuation report differs because it gives a price in a general sense but has little to do with anything besides the capital that buyer will need for a down payment, for example. The down payment will be 20% of the sale price, but if the lender will only lend 75% of appraisal, a low appraisal will mean that the buyer has to come up with more.

While the CMA can entail a walkthrough, the appraisal is always a hands-on review. It entails the appraiser walking around the home and looking for glaring issues that can bring the value way down. There is also a process for the appraisal to be disputed and while it can be lengthy, the buyer and seller have more control over this than they do the general market activity of a CMA.

Knowing Which One to Choose

A market analysis is useful for gauging the asking price on a place but it’s not required for the transaction. An appraisal is a standard part of the process that, without one, the sale might not be able to be funded.

However, a valuation report is no less necessary for sellers who don’t know how to properly price their home. Experienced local realtors will usually start with one to bring data to your first meeting that can back up the potential listing price of your home. A CMA is chock-full of information valuable to sellers who want a quick sale based on realistic terms.

After an appraisal, sellers risk losing out on their sale. If the appraisal comes in much lower than the purchase price, a buyer can make up the difference or they might have to drop out. For sellers, knowing the CMA can inform whether they want to lower the price to keep the sale or if they should hold out and find a buyer ready to pay what they’re asking.

So What Will a Valuation Report Cost You?

A valuation report requires having access to a lot of data that only realtors have access to and then knowing how to crunch the numbers. While some realtors might try to tease you with one, our Partner Agents will give you one with no obligation so you can start your relationship off based on real data. Working with a Clever Partner Agent means working with an agent from right in your backyard who knows the direction of the market.

If you’re worried about pricing your home properly, contact us today to match with an agent who knows all about pricing in your market.

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