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The essence of Collateral Risk Measure (CRM) is that it helps everyone understand the potential downside of real estate investment. Lenders use this type of tool on nearly every loan in their portfolio because they want to understand their exposure if the loan goes bad. That is, they want to know how much money they will lose if the property goes into foreclosure. So, they review area foreclosure activity, property flipping events, appreciation/depreciation trends, property history and other factors that can influence the value of a property and that gives them insight as to their risk potential.

Likewise, buyers and sellers need to understand their exposure to risk. Afterall, you are the ones making a big investment. For decades, real estate professionals have harped on price, and price alone, to determine a property's value. However, if the market is trending down, if there is foreclosure activity in the area and if market flipping is prevalent, just looking at price won't tell you the whole story. If you're a seller, this information will help in pricing your home. When you work with a real estate professional, it will give you another point of reference. If you're a buyer, this type of report will help understand the type of market you are in, a soft, normal or a heated market and how quickly (or slowly) you should act during a negotiation to arrive at a successful conclusion.

Buying property is a VERY BIG DEAL. Do your research and look beyond sales comparables to help you understand value. Be informed, as the proper tools are available.