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Real estate education is both vital and fascinating, but there’s a myth included in this learning. It’s that a CMA, generally and readily provided by real estate licenses to assist a seller in identifying value, is either a comparative market analysis or a competitive market analysis.
These terms have identical meaning and their usage may vary from state to state. Most real estate licensees, instructors and appraisers teach, profess and explain that a CMA is not an “appraisal.” They go on to say that an “appraisal” can only be prepared by a licensed or certified appraiser.
It seems the real estate and appraisal industry has attempted to coop the definition of the word “appraisal” and treat it like a copywritten word, such as “Realtor,” rather than the generic word it quite clearly is.
Every definition of “appraisal” from any respected source, without exception, rightfully defines “appraisal” as an “estimate of value.” For example, Language of Real Estate by John W. Reilly states that it’s “the process of developing and communicating an opinion about a property’s value.” Merriam Webster describes it as “an act or instance of appraising something or someone.”
To give even more examples, Real Estate Principles by Charles J. Jacobus claims that it’s “the estimate of the value of something,” and Investopedia cites that “an appraisal is a valuation of property.”
The fact is that by universally accepted definitions of the word “appraisal,” a CMA, a broker’s price opinion (BPO), a municipal assessed value for real estate taxes are all appraisals since they fully comply with the definition of “an estimate of value.”
In fact, if you bring your grandfather’s solid gold pocket watch to an antique dealer and the dealer, after inspecting it, says, “I would say this is worth about $1,000,” you have just received an appraisal.
We suffer from the misapprehension that only a licensed or certified appraiser can provide an appraisal of real estate. Any opinion of value for anything, from a creditable source, clearly meets the universal definition and is an appraisal.
What has evolved seems to stem from the fear that a real estate licensee might usurp the credentialed authority of a licensed or certified real estate appraiser. In other words, the widely held and inaccurate definition of “appraisal” is perpetrated by the policing of real state licensees and propaganda from appraisers’ trade groups.
The fact is, you or I can appraise a property, but clearly, we are not a licensed or certified appraiser.
In Massachusetts, it is perfectly proper to reference a CMA as an appraisal (because that’s what it is), but licensees must always make certain that, if using the word “appraisal,” they clearly disclose they are neither a licensed nor certified appraiser.
Joe Autilio, the former executive director of the Board of Registration for Real Estate Massachusetts, in an industry article wrote: “Yes, you (a real estate licensee) may give an appraisal of real estate but not use the designation nor promote yourself out as a ‘certified’ or ‘licensed’ real estate appraiser.”
In Massachusetts Real Estate: Principles, Practices, and Law — a Massachusetts textbook I wrote — I mentioned:
“Notwithstanding license law and regulations for appraisers, a real estate broker or salesperson may provide a market analysis, opinion of value or appraisal commonly referred to as a competitive market analysis (CMA). To arrive at an opinion of value, a licensee will typically employ basic appraisal techniques such as comparative sales approach. While a broker or salesperson may provide an appraisal, it must be explicitly stated they are not a licensed or certified appraiser.”
I have reviewed a myriad of court cases confirming that a qualified real estate broker is an expert, and their opinion of value is a valid estimate of value.
The Supreme Court of North Carolina in N.C. DOT v. Mission Battleground Park (2019) set a standard for admission of expert testimony when it ruled “any person who can qualify as an expert under that standard, which is articulated in pertinent case law, can testify without having to invoke any other source of authority.”
In summary, the current widespread misuse of the word “appraisal” may not uproot long-established mores, but everyone should raise their antenna a bit if they’re attempting to suggest a CMA is not an appraisal.
Robert M. Sawyer is an author, instructor and adviser in Martha’s Vineyard, Massachusetts.