Two common methods are often used when determining how much a house is worth: Zestimates and home appraisals. Both aim to give you an idea of a property’s value, but they are very different in how they work and how accurate they are.
Let’s break it down in simple terms.
What is a Zestimate?
A Zestimate is an estimated home value provided by Zillow, a popular real estate website. It uses a computer algorithm to calculate the value of a home based on public data, such as recent sales of similar homes, tax assessments, and other market trends. Zestimates are quick, free, and easy to access, making them popular for people curious about home values.
How Accurate is a Zestimate?
Zestimates can be a good starting point but are not always accurate. The accuracy of a Zestimate depends on the availability of data in your area. Zestimates can be close to the actual value in some places, but in others, they can be off by thousands of dollars.
What is a Home Appraisal?
A home appraisal is a professional assessment of a property’s value conducted by a licensed appraiser. Appraisers visit the home in person, inspect its condition, and compare it to similar homes recently sold. Lenders usually require an appraisal when someone is buying or refinancing a home to ensure the property is worth the loan amount.
How Accurate is a Home Appraisal?
Home appraisals are generally much more accurate than Zestimates because they are done by trained professionals who physically inspect the property and analyze the local market. However, appraisals are not perfect.
Zestimate vs. Home Appraisal: Key Differences
- Method of Calculation
- Zestimate: Uses an algorithm and public data.
- Appraisal: This is done by a human appraiser who inspects the home and analyzes the market.
- Cost
- Zestimate: Free.
- Appraisal: The buyer or homeowner usually pays several hundred dollars.
- Purpose
- Zestimate: Useful for general curiosity or early research.
- Appraisal: Required by lenders for buying, selling, or refinancing a home.
- Accuracy
- Zestimate: Can be off by thousands of dollars.
- Appraisal: Much more accurate but not 100% perfect.
Are Appraisals Always Accurate?
While appraisals are more reliable than Zestimates, they are not always 100% accurate. Here are some reasons why:
- Human Error
Appraisers are human, and they can make mistakes. For example, they might miss something during the inspection or use outdated data.
- Market Changes
Real estate markets can change quickly. If the market shifts between the time of the appraisal and the sale, the value might no longer be accurate.
- Subjectivity
Appraisals involve some level of judgment. Two appraisers may value the same home differently based on their experience and perspective.
- Limited Data
In areas with few recent home sales, appraisers might have trouble finding good comparisons, which can affect the accuracy of the appraisal.
When to Use a Zestimate vs an Appraisal
- Use a Zestimate if:
You’re just curious about your home’s value or researching the market. It’s a quick and free way to get a rough idea, but don’t rely on it for big financial decisions.
- Use an Appraisal if:
You’re buying, selling, or refinancing a home. Lenders require appraisals to ensure the property is worth the loan amount. An appraisal is also a good idea if you need an accurate value for legal or tax purposes.
Tips for Getting the Most Accurate Home Value
- Combine Both Methods
Use a Zestimate as a starting point, but get an appraisal for a more accurate value.
- Research the Market
Look at recent sales of similar homes in your area to understand the market.
- Improve Your Home’s Condition
Make repairs and upgrades to increase your home’s value before an appraisal.
- Hire a Professional
If you’re unsure about your home’s value, consider hiring a real estate agent or appraiser for a professional opinion.
Conclusion
Zestimates and home appraisals both have their pros and cons. They are quick and free but not always accurate. Home appraisals are more reliable but cost money and take more time. A Zestimate might be enough if you’re just curious about your home’s value. Remember, no method is perfect, but combining both can give you a better understanding of your home’s true value.
