What Is My Home Worth? How to Use Free Automated Valuation Models

What’s the difference between a free AVM estimate and a full appraisal?

While free AVM tools and full appraisals both aim to provide a valuation of your home, there are significant differences between the two approaches and the trustworthiness of the results.

You can use the table below as a cheat sheet when comparing an AVM and a full appraisal.

AVM benefits and limitations

The primary benefits of AVM tools are their cost and immediacy. Because the process is fully automated, it takes minimal time and processing power to compare your home against hundreds and thousands of other similar data points to generate a ballpark estimate.

One of the main approaches to any valuation model is to look at what comparable homes sold for, and AVMs can do this faster and more scalably than any other approach.

According to Bates, “Getting an online valuation is a good first step to get a ballpark number to act as a springboard or starting point in the home selling process.”

But she also warns that setting expectations based on these estimates could lead to disappointment. “Sometimes people call in with unrealistically high expectations for their home’s value and are disappointed to see what actual similar homes are selling for.”

As Bates mentioned, there are multiple reasons to approach the AVM valuation with caution. First, an AVM valuation is only as good as the data it has access to. Multiple data points may be either too difficult to obtain in an automated fashion or incomplete or inaccurate.

Bates describes one such example: “In non-disclosure states, such as Utah, [AVMs] lack actual data from the sale of a house, including the sales price. We’ve also seen these estimates significantly undervalue homes because the public record often doesn’t include the basement square footage in its property information.”

Full professional appraisal benefits and limitations

A full appraisal is the best way to get a trustworthy, accurate valuation for your home. Where the AVM approach relies fully on data and science, the appraisal approach leverages both science and art. Bates explains, “There are no two homes that are exactly alike, so you need a professional with experience to know which adjustments to make.”

A full, professional appraisal will always be performed by a trained, licensed appraiser. Typically, a homebuyer will pay for the appraisal required by the lender as part of the purchase process.

Each state has a vigorous process for appraisers to receive initial and ongoing training specific to the real estate market and laws of the state. They are trained to use multiple qualitative and quantitative data points to determine a fair, accurate value.

There are a few different methods that appraisers use to value a home:

• Sales comparison approach: The sales comparison approach involves an appraiser finding comparable homes that have recently sold and estimating the value based on similarities and differences between the comparables.
• Cost approach: Sometimes, for new homes or homes that have few comparables, the appraiser will estimate what it would cost to rebuild the home from scratch.
• Income approach: This method is mostly used for investment properties, focusing particularly on the home’s ability to generate income.

Alternative valuation approach: hybrid and desktop appraisal

During the early stages of the COVID-19 pandemic, on-site appraisals were considered a safety hazard. In order for home sales and transactions to continue with confidence, alternative appraisal methods appeared that minimized the need to be on-site for the appraisal.

• Desktop appraisal is similar to a full appraisal in every way except that the appraiser doesn’t physically visit and inspect the property. The appraiser will still use proprietary data from the market and comparables, including pictures, videos, and any other information about the subject property, to determine the home’s value.

This type of appraisal is somewhat less expensive than traditional appraisals, but they can also miss any unique home characteristics that could affect the overall value.

• Hybrid appraisal is a combination of the desktop and full appraisal approaches (hence the term “hybrid”). In this approach, the hired appraiser does not conduct a property inspection but hires a third party to do so and provide detailed notes. The appraiser then uses these notes, along with the other market and sales comparison data, to determine the home’s valuation.

The benefit of this approach is the speed of the appraisal report. Inspectors require far less training, so getting the inspection report is much faster than if the appraiser did it personally. Again, the sacrifice, in this case, is how well the appraiser can account for the property’s condition and unique characteristics without seeing them in person.

How can I find and use a free AVM estimate?

There are many free consumer-focused AVMs or home value estimators (HVE) available online. A simple Google search will reveal dozens of options from reputable providers. Because there are so many fast, free options, we advise you to try multiple tools in order to best triangulate your ballpark estimate.

Each provider incorporates its own algorithm and proprietary data into its model, so your particular property may get a higher valuation from one provider over another. Because none of the AVMs are very transparent about how their model works, or which exact data points they are using, you will have to do a bit of trial and error.

How does HomeLight’s free home value estimator work?

HomeLight’s Home Value Estimator is a fantastic option that includes a unique approach to valuing properties. We’ve done a lot of analysis and iterations to determine the right combination of publicly available, proprietary, and user-submitted data to produce more accurate value estimates.

The process includes a short questionnaire with seven questions that have been proven to increase the accuracy of your home valuation estimate. The tool asks for simple information, such as the property’s condition and the year it was built.

Another way to find out how much you could fetch for your home is by requesting a cash offer from HomeLight’s Simple Sale platform. After answering a few basic questions, you can receive a no-obligation, all-cash offer for your home within 24 hours.

If you accept, you can close the sale in as few as 10 days and choose your move-out date — no repairs, showings, or agent commissions necessary.

Partner with a top agent to determine your home’s value

After receiving your online home value estimate from HomeLight, we will connect you with top local real estate agents who can provide a comparative market analysis (CMA) for your home. An experienced agent can bypass the limitations of AVM tools to get you an accurate idea of your home’s value to help you list it for the right price.

According to Bates, “Having a full-time Realtor® with experience and access to the multiple listing service (MLS) is best for a reliable CMA. We aren’t appraisers, but we can usually get very, very close.”

Use HomeLight’s Agent Match tool to connect with a top local agent in your area. The best agents can combine the art and science of home value estimates.

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We analyze over 27 million transactions and thousands of reviews to determine which agent is best for you based on your needs.

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Free AVMs are a great first step

While automated valuation models aren’t the same thing as “online appraisals,” they can help you get a quick ballpark estimate of your home’s value that you can use to start exploring and making plans. However, as soon as you get serious about selling your home, we recommend consulting with a top agent who knows the local market and buyer trends in your area.

Header Image Source: (Caroline Feelgood / Unsplash)