Value House
Automated valuation

The number online is a model. It has never seen your house.

An automated valuation model reads records and recent sales, then predicts. That is useful until a decision with money attached rides on it.

Below: what the estimates are built from, where they go wrong, and when you need an appraiser instead.

An aerial view looking straight down at a suburban residential street, rows of houses with driveways, lawns and mature trees.
Side by side

Two different things

One is a prediction from data. The other is an opinion from a person who is accountable for it.

Automated estimate

Algorithm
  • Built fromPublic records, tax data, prior listings, recent nearby sales
  • Sees the propertyNo. It has never been inside or outside
  • Knows conditionNo. It assumes condition from age and records
  • Signed byNobody
  • Accepted by a lenderNot as an appraisal
  • CostsNothing

Appraisal

Licensed person
  • Built fromInspection, measurement, comparable sales and adjustments
  • Sees the propertyYes, depending on the scope ordered
  • Knows conditionYes, first hand where inspected
  • Signed byA licensed or certified appraiser, with a license number
  • Accepted by a lenderYes, that is its purpose
  • CostsA fee, paid by the borrower on a loan
The failure modes

Where a model goes wrong

A model knows only what the records say, so it misses in the same places every time.

Condition. Two houses built the same year on the same street can be thirty years apart in condition. Records cannot tell them apart. A person can.

Unpermitted or unrecorded work. A finished basement that never reached the county file does not exist to the model. Neither does a bad addition.

Thin markets. Rural property, acreage, and anything unusual has few real comparable sales. Models degrade fast when the nearest similar sale is not similar.

Rapid change. Records lag. In a market that has moved quickly, the model is describing a few months ago.

The moment it stops being a curiosity

Checking an estimate for interest costs you nothing. The trouble starts when a number with no inspection behind it gets used for a decision with money attached. Pricing a listing. Settling an estate. Splitting assets in a divorce. Appealing a tax assessment. Deciding whether to remove an appraisal contingency.

At that point you need a licensed appraiser who has been in the building and will sign the number.

The signed version

When you need the signed version

Refreshing a free estimate will never turn it into an appraisal. For that you need a licensed appraiser who looks at the property and signs the report.

National

Pocket Appraisal is a national residential appraisal service. If you have reached the point where a model is not enough, it is one way to get an actual appraisal rather than an estimate.

Questions

Common questions

What is an AVM?
An automated valuation model. It is software that estimates a property value from public records, tax data, prior listings and recent nearby sales. Every free online home value tool is one. It carries no inspection, no signature and no professional liability.
Why is the online estimate different from my appraisal?
Because they are built from different information. The model works from records and cannot see condition, finish quality, layout problems or unrecorded work. An appraiser inspects, measures and selects comparable sales by judgment rather than by proximity alone. Where the records are incomplete, the two will diverge.
Can I use an online estimate for a loan?
Not in place of an appraisal. Some lenders use automated valuation internally to decide how much appraisal scope a file needs, but the estimate on a consumer website is not a substitute for a signed appraisal report and will not be accepted as one.
Are online estimates useless then?
No. For a standard house in a dense, well recorded neighborhood with plenty of recent sales, they can land close, and they are a reasonable free starting point. The problem is that they give no signal when they are wrong, and they are often most wrong where the stakes are highest.
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