Do not confuse valuations carried out by property valuers with free appraisals by real estate agents.
Real estate agents provide (almost always) free appraisals with the hope that they may get the listing for your property, that is, to be appointed by you the owner to sell your property.
Real estate agents are constantly looking for new properties to sell as they cannot stay in business without new properties to sell. A real estate agent is dependent on the sale of the property taking place to earn a commission, hence an agent's appraisal is never independent. On the other hand, a property valuer has no pecuniary interest in the sale and earns a relatively small fee for a totally independent valuation.
A valuation report prepared by a licensed property valuer is a legal document whereas a real estate agent's (almost always) free appraisal is merely used as a sales or promotional tool. Typically, a real estate agent may provide the vendor with the following when chasing the listing:
- A one or two-page letter with their company letterhead that states the appraised value or value range of the subject property with / without a table of "comparable sales".
- A CMA (or Comparative Market Analysis) that could include pages and pages of sold properties and current property for sale listings.
The appraisal and CMA relies on vague market trends. The valuation report relies on specific, verifiable comparable sales. The valuation looks at other factors besides building area, land size and location, such as zoning, topography, condition and appeal of the building, encumbrances, development potential and much more. A CMA delivers a ''ball park figure.'' A valuation states a point value that is defensible and carefully documented opinion of value.
Whilst CMAs can be produced within minutes with several clicks of the mouse using certain property databases subscribed by the agency, a valuation report requires rigorous research, analysis, verification, due diligence and attention to detail.
But the biggest difference is the person creating the report. A CMA is created by a real estate agent who may or may not have a true grasp of the market or valuation concepts. The valuation is created by a licensed, certified professional who has made a career out of valuing properties. Further, the valuer is an independent voice, with no vested interest in the value of a property, unlike the real estate agent, whose income / commission is tied to the value of the home.