How a Free Home Appraisal Works

You have plans to remodel

Dying to rip out your 1970s kitchen or redo the bathrooms? A home value estimate can provide an idea of what your home is currently worth. From there, you can ballpark the amount of value a certain type of renovation would add and whether the total cost of the project makes sense.

You’re considering a home equity loan

A home value estimate can give you an idea of how much money you might be able to access through a home equity line of credit, for instance.

“Some people will use them because they want to remodel and are curious how much equity they may have or what their home may be worth after the work,” says Joshua Cooley, a top-selling real estate agent in Eugene, Oregon.

You’re going through a life change

Another common reason people use online home value estimators is a divorce or death in the family. Any official legal proceeding will likely need an appraiser’s report, but heirs or estranged spouses often like to get a general idea of a property’s worth.

How to get a free home appraisal

You can consider HomeLight’s Home Value Estimator to begin with.

With HomeLight, you input your address, and the software analyzes millions of real estate transactions, collects details about your property, and pulls in the most important elements of a comparative market analysis. Users then receive a preliminary estimate of value in under two minutes.

We’ll also support our estimate with a cash offer from Simple Sale, a platform for selling your house fast.

Today, your options to get a free home value estimate are extensive. We put together a list of home value estimators compared, featuring tools from Chase Bank, Bank of America, RE/MAX, Eppraisal, and others to review. You can always use more than one and see what you get!

It’s important to note that our free home estimate, like others offered on the web, does not constitute an actual appraisal. It’s an estimate to be used as a first pass or starting point.

Free appraisals vs. professional appraisals

Licensed appraisers are still an integral part of the housing industry.

“Online tools set the initial benchmark,” says Cooley. “But these tools don’t walk through your home. They don’t engage with the five senses.”

Here’s how an appraiser’s process will differ from an online estimate:

Square footage: Data vs. measurement

An AVM uses publicly available records from places like the county auditor’s office to gather a property’s gross living area, but these figures can be out of date or even inaccurate, explains Jamie Owen, a Northeastern Ohio appraiser with over two decades of experience in the field.

Appraisers instead will physically measure the interior and exterior of the home to make sure the public records are accurate. “Gross living area is probably the number one factor for the value of that land,” Owen explains, “but pulling it off of the public record can be flawed.”

Location spottiness

“AVMs can be weak in specific areas,” says Owen. For example, a neighborhood under a certain ZIP code might be split into two different school districts, a major value differentiator. An appraiser with that local knowledge would know to pull comps from homes only within that same school district, while an AVM might mix comps from the two districts, resulting in a skewed valuation for your property.

In addition, an AVM might struggle to calculate the value of a property with little to no available comps in sparse or rural areas. In that case, an appraiser would probably have better success using an alternative method of calculating value, such as the cost approach or income approach, or through firsthand and personal knowledge of the locale. 60 miles is the median radius for appraisers in rural areas, as shown in the latest National Association of Realtors (NAR) Appraisal Survey.

Condition

An AVM must work with the data and information it has to calculate a home’s value. These tools will not know that you completely renovated the second-floor bathroom unless you input those details. An appraiser has the advantage of taking a home’s real-time condition into account with an onsite visit of the property.

Value of unique features

AVMs have respectable precision when determining the value of homes in a development or condominium complex, says Owen, because they are all relatively the same.

However, if your home is unique or different in some way from the rest on the block, online home appraisal tools may not value it with as much accuracy. Sellers will see this especially when it comes to lakefront properties or homes with a view, where precise location makes a big difference in appeal and value.

Where AVMs lose in accuracy points, however, they gain in speed — they’re able to comb through millions of pieces of data almost instantly to estimate a home’s value, making it a fast and easy starting point for many home sellers, says Owen.

However, you won’t always understand where the estimate comes from. “A good appraiser can tell you where they obtained their data and how they developed every aspect of the appraisal,” Owen says. “You can’t ask a computer that.”

User error

In addition to rapid market changes, the user data can also be flawed because “it’s so subjective,” says Lorraine Danielson, a top real estate agent in the Atlanta area. People might be able to answer specific questions clearly, such as, “Have you finished your basement?” but asking a homeowner to rate their home’s condition as “good” or “fair” is tricky. “There’s that human element to it… What some people think is messy is other people’s best day ever.”

Next up: Get a comparative market analysis

If you thought the only way to get a free home appraisal was on the internet, you’d be wrong! Somewhere between AVMs and a licensed appraiser, a top local real estate agent is going to be able to help you find out how much your house would sell for through a CMA.

Danielson says her office always asks people why they want to know their home value, and then works with them to connect with a lender or provide the information they need. “We work with great lenders if they’re looking to refinance or cash out,” she says. “We try to be a resource there. As automated as you are, you still need people.”

CMA pulls in characteristics an AVM might miss

Like appraisers, real estate agents use comps as a reference point for the subject home and then make dollar adjustments based on competitive differences. The analysis takes into account significant features that drive or reduce value. An agent will be able to pull comps from their local MLS, giving them greater insights into the area, and will also offer to do a walkthrough of your home if you’re thinking about listing it.

The CMA, which takes a more in-depth look at the unique characteristics of your home and property, will be more accurate than an online estimate and can actually help guide your pricing strategy before your home hits the market. If your agent has done their homework, the CMA should be close to the home’s appraisal price.

How to get a CMA

An agent’s CMA will be free as part of their listing services, but keep in mind that if an agent goes through the work of putting together a CMA for you, they may expect to at least be in the running to represent the home on the market.

While an agent’s CMA can be trusted as a pricing tool, listing your home based on an AVM alone is risky — real estate experts advise using these tools as a starting point rather than the final word.

What to do if your home’s online estimate looks off

If you’re a homeowner who doesn’t check their home’s value online obsessively, you may be surprised to find that the estimates being presented on various sites look off. This can be a problem because when the time comes to sell, buyers are going to look up your address and if the internet says your home is worth way less than you’re asking for, it could weaken your negotiating position.

So, start owning your home’s history and value online. Claiming your property on sites like Zillow, Redfin, and Realtor, and updating your home’s online value, can change the perception of the property to better align with its current value.

In addition, check your records with the local county assessor’s office to determine if the information they have on file is the most accurate report of your property. If it isn’t, contact your assessor to request the record be updated. When the public record is updated, the estimation on the AVMs should change the next time it combs public data.

Free home estimates: A great starting point

Everyone needs a starting point, and when it comes to finding the value of your home, a free online home estimate is a great one. You’ll be able to figure out a ballpark estimate of your home’s value within seconds, giving you a general idea of how much your home may be worth.

But, an AVM is not the end-all-be-all when figuring out the price of your home. The figure won’t hold up under the scrutiny of a formal appraisal, and it’s just not tailored enough to help you determine a pricing strategy. Start with an online estimate, but follow it up with the opinion of a trusted agent if you’re planning to sell soon.

Header Image Source: (Pixasquare / Unsplash)