How a Free Home Appraisal Works (And Where to Get a Good One)

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It’s the year 2005. You own a house, and you’d like to know what seems like a simple fact: how much is it worth? You soon come to discover, though, that your property’s value will be an elusive — not to mention expensive! — number to track down in any shape or form.

You’ll have to call up an appraiser for their professional opinion and be prepared to write a fairly large check. We’re talking about at least several hundred dollars to cover the appraiser’s onsite visit, comps analysis, and compilation of findings into an official report.

Fast-forward to 2020. You still own that house and you’re wondering, has it appreciated over the years? To find out, you pop your address into an online price-check tool faster than you can place an Amazon order. Out comes an instant home value estimate that’s totally, 100% free.
What a contrast!

So what’s the catch?

Like much of the technology we rely on today, the fast and free home appraisal has its strengths and limitations. And there’s a lot you need to know about the digital-age home appraisal tools before you try to use one for a task as serious as, say, pricing your home.

In this post we’ll cover:

  • The history of the “free home appraisal” (i.e., online home value estimates)
  • How automated valuation models work
  • How online home appraisals differ from an appraiser’s opinion
  • Home value appraisal alternatives, such as the comparative market analysis
  • What free home appraisals can (and cannot) be used for
  • What to do if your online home appraisal looks off
A photo of a house illustrates the topic of free home appraisals.
(Source: Greg Rivers / Unsplash)

The history of the free home appraisal

“Say ‘goodbye’ to appraisers — and possibly real estate agents,” reads a CNN Money article published Feb. 8, 2006. It was a momentous announcement for real estate technology: the launch of Zillow and the Zestimate, which the article dubbed a “free tool that guesses how much any given house is worth.”

Several years and algorithm updates later, Zillow reports that it publishes home valuations for 97.5 million properties. But it hasn’t had quite the impact that CNN Money projected all those years ago.

Appraisers are still necessary

Despite the dissemination of property data and advancement of mathematical modeling to calculate home value instantly based on data, licensed (re: human) appraisers are still an integral part of the housing industry. You generally can’t get a mortgage or refinance your home without a professional appraisal first, and real estate agents still facilitate 89% of home sales.

However, the home appraisal landscape has certainly shifted in a fundamental way with the rise of what are now known generally as automated valuation models (AVMs). And the algorithmic programs that drive instant value estimators will only gain in accuracy as time goes on and the technology improves.

The fact remains, though, that home value is a tricky little thing to calculate, and online home value estimates are not considered official appraisals.

What goes into a home’s value?

There are so many variables to consider, from your home’s unique characteristics to the changing nature of the real estate market, that if a valuation doesn’t take into account your new flooring, room addition, or unrecorded defects, it can be skewed high or low. As of 2020, Zillow has a self-reported nationwide median error rate of 7.5% for off-market homes.

Home value is also not a number you want to get wrong. A house is typically your largest asset and any kind of decisions you make around it will inevitably be high stakes. In fact, our research shows that the no. 1 mistake people make when selling their home is overpricing. Underpricing is risky, too — because it could mean that you leave precious dollars on the table.

A photo of a computer illustrates the process of free home appraisals.
(Source: Filiberto Santillán / Unsplash)

How AVMs work

Many online real estate sites provide free home valuations — including HomeLight. Each one arrives at their valuations using their own formula. Generally speaking, though, AVMs use some combination of the following data, in addition to proprietary software, to determine the value of a property:

  • Data from county auditor and tax assessor’s records. This includes a home’s property tax assessment and the auditor’s assessment of gross living area for a particular property.
  • User-submitted data. On certain platforms, users can update the facts of their property for a more accurate reading, adding information that might boost value like additional bathrooms, a new roof, or a kitchen renovation.
  • MLS listings and sales. Using software and algorithms and data from millions of real estate transactions, free home appraisal tools will draw from recently sold comparable homes to determine property value.
A photo of a house illustrates the topic of free home appraisals.
(Source: chi m / Unsplash)

How online home appraisals differ from an appraiser’s opinion

Joshua Cooley, a top-selling real estate agent who’s seen online valuation tools grow to become a standard first step for home sellers in his dozen years in the business, shares his perspective on the tools:

“[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 will use 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.


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 it comes to 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 estimation 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.”

A photo of a house illustrates the topic of free home appraisals.
(Source: Ian Keefe / Unsplash)

Our free home estimate tool — and why it’s different

By now you have a good overview of how AVMs work, and what the pros (speed and cost) and cons (risks of inaccuracies) are to using them. What’s nice about HomeLight’s Home Value Estimate tool is that we pair housing market data with your own personal insights about your house.

We figure since you’re the one living there, you probably know things about your home that the internet does not!

So, before we run any numbers, we’ll actually ask you 7 simple questions about the little things that make your home different. We then combine your answers with data from multiple trusted sources to come up with a real-world valuation. Using this method, we can predict your home’s current value with far greater accuracy.

In addition, with your home value estimate from HomeLight, you get a few bonuses. We’ll provide you with a list of top local real estate agents in your area who are proven to sell homes like yours for more money if you’re thinking of selling.

We’ll also back it all up with your home’s Simple Sale price — typically 90%-95% of your home’s full market value — if you’re looking to sell your house quickly and skip the listing process entirely.

However, 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.

A photo of a house illustrates the history of free home appraisals.
(source: Naomi Ellsworth / Unsplash)

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 what’s called a comparative market analysis (CMA).

And if this agent has the right experience and really understands your local market, their going to treat the CMA like in an appraisal, i.e., with as much pricing precision as possible.

CMA pulls in characteristics an AVM might miss

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 so some of that appraiser nuance and artistry still applies.

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

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 will 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 off an AVM alone is risky — real estate experts advise using these tools as a starting point rather than the final word. But if that’s the case, what good are AVMs and should you even consult one?

A photo of a home interior illustrates the topic of free home appraisals.
(Source: Vinicius “amnx” Amano / Unsplash)

What are online home appraisals good for?

Here’s the thing: Knowing what your house is worth, even if it’s not 100% exact, is a huge advantage. Getting an estimate from an AVM is a great launch point to determining the value of your property.

Your home’s value is the key to calculating your home equity and ultimate net proceeds should you ever sell your home. That estimate could help you recognize when it’s time to ditch costly private mortgage insurance payments (though a lender will still require an appraiser’s opinion on that), lower your property taxes, or flag an incorrect price estimation online.

“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,” Cooley adds.

A photo of a house illustrates the topic of free home appraisals.
(Source: Derick McKinney / Unsplash)

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 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)