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Maybe you’ve just started to look for a house, or you’ve found a property that you love and are curious about what it’s worth. Or perhaps you’re thinking about listing your current home for sale. Because home values are constantly changing, how do you know what your property is really worth? Do property value lookup tools really help?
Both buyers and sellers have good reason to get an objective view of a home’s value before signing on the dotted line.
Richard Stives is an experienced, top-selling Realtor® in El Paso, Texas. According to him, sellers want to know a property’s value so that they can be sure they’re not leaving money on the table, whereas buyers want to know that they’re paying a fair price and that the home will appraise. “Especially in the last couple of years with the market being high and competitive, to know whether or not they’ll have to bring money to the table to bridge an appraisal shortfall,” Stives explains.
Here’s what to know and where to look to help ensure you make a sound real estate investment or get the best price when you sell your home.
1. Check out online portals
Online portals and apps are one of the most convenient ways to look up property values. Websites like Zillow, Redfin, Trulia, and Realtor.com are some of the many real estate portals that will present a value estimate when you search an address.
These sites also provide automated valuation models, or AVMs, to calculate property values. Differences in models can lead to differences in property valuation. These sites pull in public records data and show you what a property sold for over the past several years. An AVM will use that information in its algorithm to create an estimate of a property’s market value if listed today. We’ll address value calculators a bit more later in this post.
“These services only look at the data they have. If it’s inaccurate data, it will reflect an inaccurate estimate of your property value. The algorithms do not take into consideration any updates, the quality of materials, or improvements, like an appraisal or a comparative market analysis (CMA) by an agent will.”
Are online portals trustworthy?
Each of these online sites will claim the listings are as up-to-date and accurate as sites like Redfin and Realtor.com, both of which are actually linked to the Multiple Listing Service (MLS). Overall, no website can be considered as reliable as an appraiser (or even an agent), but they can still provide a ballpark figure to evaluate a property in the early stages of your search.
Stives cautions sellers against treating the online property value as gospel, pointing out that “the online model has never been in your house.” He adds that “a Realtor® has the eye for property conditions that impact value negatively, as well as features and amenities that increase value in the marketplace,” and could give you a more realistic value estimate.
2. Visit tax assessors’ sites
Every county and city across the U.S. has tax assessor websites where you can look up a property’s value by address. Properties are assessed at different times of the year to calculate property tax, and the assessed value is often not the same as the appraised or market value.
Therein lies the problem. Suppose a property is assessed in January, and you list your property in November of the same year using the assessed value. Market values may have risen or fallen over that time, giving you an unreliable estimate of the actual value of your property.
Are tax assessor sites trustworthy?
Tax assessor sites provide accurate information, such as the number of bedrooms and baths. However, in a hot market, they can quickly become outdated. In past years, Stives says that tax-assessed values were way off in his area. While they’ve somewhat caught up, he still thinks they’re low for move-in ready homes in excellent condition. Assessor values don’t take into account outside factors that may generate more demand for a property, and thus drive up its price, such as low housing inventory.
Because these values don’t truly reflect what happens in a free and open market, they lack a highly accurate valuation of your property. Assessed values should only be used as one vantage point in combination with other estimates.
3. Study the MLS
Only a licensed real estate agent can access the multiple listing service or MLS. An MLS listing will tell you exactly what homes are currently listed for (as well as the listing history, if it exists).
On the platform, brokers share information with other brokers and real estate agents about properties they have listed. They could leave comments about a home’s appearance or condition after a home tour, and indicate whether or not they think the house is accurately priced. This inside information can be invaluable in deciding what to offer on a house, or when picking a list price for your home.
Is the MLS trustworthy?
As a private database that is created, paid for, and maintained by real estate professionals, the MLS is an accurate tool for determining property values. When a listing agreement is signed, an agent typically has between 24 and 48 hours to register a complete listing on the MLS. Listings are up-to-date and accurate, based on location, square footage, condition, and more.
However, if a client insists that an agent list at a higher (or lower) price than the agent thinks that property will fetch in the open market, the price listed may not reflect its true value or eventual selling price.
4. Analyze comps
Comps — short for comparable recently sold homes — work for parties on either side of the real estate transaction.
Comps show the sale price of recently sold properties in the same area based on size, condition, and features. Recent comps are best and can help you determine a market value of a property you’re interested in buying or to estimate the current value of your property before you list it for sale. While an agent will analyze comps when preparing a full comparative market analysis for your property, you can also find some of this information on your own.
Are comps trustworthy?
Comps are one of the most trustworthy ways to calculate a home’s value because they show the actual sales price of comparable properties. When buying a home, you need to know its market value, so you have a place to start when making an offer. When listing your property, you want the best listing price to attract buyers.
However, when a house is located in a rural area where there aren’t many recently sold listings in close proximity, or when a house has unique features that aren’t reflected by other homes in the area, finding comps can be tough.
5. Ask an agent to prepare a CMA
A comparative market analysis, or CMA, is a comprehensive assessment of a property’s value prepared by a real estate professional who is familiar with your market. A CMA starts with the sold price of recent properties in an area within a specific time period, usually between six and 12 months. It then compares those properties to the home you want to buy or sell to determine an accurate value for that home.
CMAs are detailed reports that consider variables such as location, size, condition, amenities, number of bedrooms and bathrooms, lot size, year built, renovations and interior improvements, and so on, to help determine a property’s market value.
Most agents are happy to prepare a CMA, often free of charge, to win your business. You can request CMAs from more than one agent, too. An agent follows these steps to put together a CMA:
- The agent or broker finds a minimum of three comps in the area. If there are no recent sales, they may use expired or unsold listings.
- Any differences between the subject property and the comps are documented and reviewed.
- Any differences are given an estimated value (price). For example, an agent may value an extra bedroom at $4,000 in your market.
- The agent or broker gives you an estimated price range based on all of the criteria so you can determine a competitive offer price or sales price.
Is a CMA trustworthy?
The trustworthiness of a CMA depends on the expertise of a local broker or agent in compiling a detailed report examining comparable properties. Unlike when you pull comps yourself, the agent adjusts for additional features or condition, which makes a CMA a more dependable way to determine a property’s value. “The key here is that an experienced agent is going to walk through your home and identify pros and cons,” says Stives. “Those pros and cons impact what buyers are going to think about the value of your home,” which means that a CMA is a more comprehensive view of its value.
6. Evaluate a BPO
A broker price opinion, or BPO, is slightly different from a CMA or appraisal. Like a CMA, a real estate broker (who typically has more experience than a sales agent) will also consider comparable surrounding properties when deciding on a price for a particular property. A BPO looks at location, any costs to get the property ready for sale, or what it will cost to make repairs.
There are two types of BPOs — internal and external.
- Internal: This involves spending time inside a property to examine the home’s condition.
- External: A broker accesses the outside of the property only. Think “drive-by assessment.”
Both internal and external BPOs are helpful in the early stages of setting the list price of a home. However, some state laws limit the use of broker price opinions in specific circumstances. You can check with your state’s real estate commission, the department of licensing, a real estate broker, or even a real estate attorney about the legality of using a BPO to make financial decisions or to prove a home’s value.
Is a BPO trustworthy?
It depends! This is especially true with an external broker price opinion, which is simply a “drive-by” of the property. However, a BPO can be valuable in the early stages when estimating a property’s value. It’s best to consider a BPO as just one piece of the home valuation pie.
7. Schedule an appraisal
While the appraisal typically happens after an accepted offer, as part of the financing or purchase process, individuals — buyers or sellers — can hire appraisers independent of the lender. This is most commonly done if a buyer is making a cash offer, in which case a mortgage lender won’t order an appraiser. Sellers may also have reasons to request a pre-listing appraisal, such as in cases of divorce, to ensure a fair division of assets.
A trained appraiser looks at the house and determines its value. They also look at comps, condition, and upgrades. Generally, an appraisal is considered the most reliable method to determine a property’s value.
Rodriquez contends that appraisals are subjective. “If an appraiser isn’t familiar with the area or not located nearby, getting a low appraisal is possible. If that happens, an agent can contest the appraisal by submitting at least three to four comparables to the bank. This is rare, however.”
That said, there are several reasons why an appraisal is considered credible, such as:
- Sheer numbers. Appraisers see a lot of homes, so presumably, they have a good idea of market inventory.
- Access to comps. Appraisers also look at comps to evaluate a property based on condition, features, square footage, and other variables. And an appraiser knows what different features are worth in this market.
- Use of various approaches. Typically an appraiser will use a sales comparison (comps) approach to evaluate a property, but a cost approach and income approach are other ways to evaluate a property.
- Cost approach: Determines how much it would cost you to completely replace your existing house with a similar one.
- Income approach: This is the ability of your property to earn an income — say, as a rental property.
- Sales comparison approach: Puts more weight on the sale price of similar properties in a specific area within a specific time period.
- Unbiased opinion. Appraisers are objective and impartial in their assessments of the market value of your property.
- Longevity. Appraisals don’t technically expire. However, it is up to each lender if and when they want to accept an appraisal.
Rodriquez adds, “If a property I list is particularly unique, I may meet the appraiser at the property just to ensure they catch everything to make an accurate appraisal, like hardwood flooring vs. vinyl or laminate planking, or custom cabinets vs. those built on-site.”
Are appraisals trustworthy?
Generally, appraisals are very trustworthy. In real estate, their primary purpose is to provide an unbiased estimated opinion of the market value of a property.
While there is room for error, because appraisers are certified, trained, and unbiased in their assessments, you can be confident that an appraisal is usually fair.
8. Use the FHFA House Price Index Calculator
The Federal Housing Finance Agency, or “FHFA,” has an online tool that draws on its vast data to help level the playing field in the housing market. The FHFA House Price Calculator does not forecast the actual value of any particular home. Instead, it estimates what a house would sell for if it appreciated at the average appreciation rate for all surrounding homes.
As a tool, it can be helpful to get an idea of the value of your house. However, it does not consider seasonal changes, the condition or age of your home, or any improvements you’ve made.
Is the FHFA House Price Index Calculator trustworthy?
As a starting point, yes, the price tool is trustworthy. The federal government has access to data from the largest 100 metropolitan statistical areas (MSAs) in the U.S., which it uses in the price tool.
But, given that there are over 400 MSAs, this tool may leave a lot of information off the table for specific information on a home in your area.
9. Plug into a value calculator
There is a difference between simply inputting your address into Zillow.com or another real estate website to get their estimated value and using an “Automated Valuation Model,” or AVM. An AVM that asks questions and gathers more data about your home — or the home you plan on buying — before returning a value, will return a more accurate value.
The HomeLight AVM asks seven simple but specific questions about your home to ensure we have the most up-to-date data about the property. By providing these details, you’ll see a much more accurate valuation of your home. Along with an estimated ballpark value, HomeLight’s free Home Value Estimator tool also provides additional selling suggestions and options. Sometimes, you’ll even see a 90% to 95% offer come in on your home’s market value before you even consider listing it.
Are value calculators trustworthy?
Some value calculators are more trustworthy than others. Much of their reliability depends on if the valuation tool uses more than a default algorithm to evaluate your home’s value, and if it generates a detailed report.
If you aren’t sure what goes into a valuation calculator you’re considering using, read the fine print. It’s also a good idea to consult several of them (and don’t trust any to have an actual appraised home value).
Where do you turn for an accurate property value lookup?
Sure, you could spend hours online becoming a property value guru — but why, when you could just reach out to a top agent? They not only have access to many of the best tools, but their walk-through of your home will also give additional insight that no online tool can match. Combined with their in-depth knowledge of your local market conditions, their analysis will likely return the most accurate property value — whether you’re buying, selling, or just curious.
Writer Kathryn Pomroy contributed to this story.
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