Valuation and Market Analysis
Three approaches
Sales comparison carries the most weight for residences; cost approach fits new construction or special-use property; income approach (gross rent multiplier, capitalization rate) serves investment property. Highest and best use frames all three: legally permissible, physically possible, financially feasible, maximally productive.
CMA versus appraisal
A Colorado broker may prepare a comparative market analysis to price a listing or guide a buyer, but may not call it an appraisal or perform a USPAP appraisal of a federally related transaction - that belongs to a licensed or certified appraiser. A CMA should be dated, disclose data sources, and state that it is not an appraisal.
Adjustments
Adjust the comparable toward the subject: if the comp has a feature the subject lacks, subtract; if the subject is superior, add. Then reconcile rather than average - weight the most similar, most recent, most proximate sales.
Traps: averaging adjusted values; adjusting the subject instead of the comp; guaranteeing square footage (tell buyers to verify); using price per square foot across dissimilar homes; treating an automated online estimate as a CMA.
Worked example: the subject is 1,800 sq ft with no pool. A comp sold for $420,000 at 1,700 sq ft with a pool. Square footage is valued at $100/sq ft, the pool at $15,000. Adjustments: +$10,000 for the 100 extra square feet the subject has; −$15,000 for the pool the subject lacks. Adjusted value = $420,000 + $10,000 − $15,000 = $415,000.