{"id":26136,"date":"2021-12-31T11:44:28","date_gmt":"2021-12-31T19:44:28","guid":{"rendered":"https:\/\/www.homelight.com\/blog\/?p=26136"},"modified":"2022-01-07T09:11:06","modified_gmt":"2022-01-07T17:11:06","slug":"buyer-free-home-appraisal","status":"publish","type":"post","link":"https:\/\/www.homelight.com\/blog\/buyer-free-home-appraisal\/","title":{"rendered":"What\u2019s a Free Home Appraisal, And Can I Use One When I Buy a House?"},"content":{"rendered":"

You\u2019ve started the exciting process of searching for a new home, and as your real estate agent<\/a> walks you through potential properties, you might notice that some of the listing prices vary by quite a bit … which may cause you to wonder just how the seller\u2019s listing prices are calculated.<\/p>\n

Why is one house priced lower than another, even though it has more bedrooms? Why is the one located in a particular neighborhood, but otherwise seemingly ordinary, at the top of your budget? How do you know that the listing prices on a house are accurate, and is there any way to research a home\u2019s potential value yourself?<\/p>\n

The short answer is \u2014 yes! There are free online valuation tools<\/a> that you can use to see what a house might be worth. You\u2019ve probably even seen these estimates when you look at listings online, and the difference between that online valuation and the home\u2019s sales price can be pretty substantial. These types of valuations seem like a handy way to check a home\u2019s sale price against the value, but how accurate are they?<\/p>\n

We\u2019ve investigated online appraisals, speaking to qualified real estate agents and experienced appraisers for insight into how free online appraisals work and how they differ from a full appraisal conducted by a licensed professional.<\/p>\n

Let\u2019s take a look at just how these free appraisals work, and whether this type of valuation has, well, any value!<\/p>\n

\"A<\/a>
Source: (Courtney Corlew \/ Unsplash)<\/figcaption><\/figure>\n

What is a free home appraisal?<\/h2>\n

Free home appraisals, sometimes referred to as automated valuation models<\/a> (AVMs), calculate the value of a house based on an algorithm that factors in other houses of similar size and age that recently sold in the same region, as well as geographic data, such as flood zones and neighborhood walkability. Getting a value can be as easy as plugging in a property address.<\/p>\n

Because these online valuations<\/a> are free, it can be tempting for both buyers and sellers to try to use this kind of assessment when trying to figure out what a house is worth. But does the modern technology of these automated appraisals take into account everything that should be considered when determining the value of a home? According to the experts, not necessarily.<\/p>\n

Where do free online appraisals get their data?<\/h2>\n

When you plug in the property information for a free home appraisal, the data is calculated by the specific algorithm created by that particular site. That\u2019s why you might see slightly (or sometimes more than slightly!) different home valuations on different platforms \u2014 and those values can change quickly, sometimes in as little as one day.<\/p>\n

The algorithms pull information from recent home sales in the immediate area and use homes that might have the same number of bedrooms and same overall square footage, even if they don\u2019t have anything else in common with the house you\u2019re investigating. Some algorithms also calculate value based on average sales in a particular area \u2014 which, especially in older neighborhoods where not every house has the same floor plan, and many homeowners have made major upgrades, may be inaccurate.<\/p>\n

Veteran Nevada agent Daryl Hanna<\/a>, who works with over 65% more single family homes than the average agent in his area, says that while these algorithms do usually base their data on location, home size, and recent sales in that area, they can\u2019t factor in any of the important details about the house.<\/p>\n

\u201cWith an AVM, that algorithm isn\u2019t standing inside your home,\u201d he says. \u201cIt doesn\u2019t consider upgrades, where the house is located in a neighborhood, or if it’s near power lines or a busy street. It\u2019s like throwing a dart within a one-mile radius.\u201d<\/p>\n

Who does free appraisals, and when did they become so popular?<\/h2>\n

The advent of online real estate services, which started to become common in the early 2000s, meant that homebuyers could peruse available homes for sale on their own, and sellers also had a greater ability to try to sell their home themselves. Many of these sites started providing AVMs on properties, and today, most sellers will at least look at the online valuation of a property when deciding on a sales price, and buyers will often start their house-hunting process via computer.<\/p>\n

According to appraiser Paul Rowe of Rowe Appraisal Group<\/a> in Chicago, AVMs aren\u2019t a completely new creation.<\/p>\n

\u201cI\u2019ve heard older appraisers talk about them, and they were used by tax assessors upwards of 30 years ago,\u201d he says, \u201cbut modern AVMs and their relevance in the real estate market is definitely new.\u201d<\/p>\n

Online sites that offer free home valuations include:<\/p>\n