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Multiple methods exist for estimating property value. Each serves different purposes, has different levels of accuracy, and is appropriate for different situations. Understanding the differences helps property owners choose the right valuation method for their needs.

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Valuation Methods Overview

MethodWho CreatesCostAccuracyBest For
AppraisalLicensed appraiser$400 - $600HighestMortgages, legal matters
CMAReal estate agentFreeGoodListing, buying decisions
AVMComputer algorithmFree to $50VariableQuick estimates
BPOReal estate agent$50 - $150ModerateLender decisions
Tax AssessmentGovernment assessorN/AVariableProperty taxes

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Professional Appraisal

Independent opinion of value by licensed or certified appraiser following professional standards (USPAP).Includes physical inspection, market research, comparable analysis, and detailed report.
  • Performed by licensed professional
  • Follows standardized methodology
  • Includes physical inspection
  • Considers property-specific factors
  • Legally defensible
  • Required for mortgage lending
  • Accountable to professional standards
  • Costs $400 - $600+
  • Takes 1-2 weeks
  • Point-in-time value only
  • Dependent on appraiser competence
  • Can’t predict future values
  • Most mortgage transactions
  • Legal matters (estate, divorce)
  • IRS purposes (donations, estates)
  • Insurance disputes
  • Litigation

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Comparative Market Analysis (CMA)

Analysis of comparable sales prepared by real estate agent. Uses MLS data to estimate market value.Not an appraisal. Agent provides opinion based on market knowledge and comparable sales.
  • Free (provided by agent seeking listing)
  • Quick turnaround
  • Local market expertise
  • Includes active and pending listings
  • Considers current market conditions
  • Good for pricing decisions
  • Not independent (agent may have interest in outcome)
  • No professional standards required
  • Quality varies by agent
  • Not accepted for lending
  • No physical inspection required
  • Not legally defensible
  • Deciding whether to sell
  • Setting listing price
  • Making offer on property
  • General market knowledge
  • Preliminary value estimate
FactorCMAAppraisal
CreatorAgentLicensed appraiser
CostFree$400 - $600
StandardsNone requiredUSPAP
IndependenceMay have interestRequired independence
InspectionOptionalRequired
Legal useNoYes
Lending useNoYes
CMAs are useful tools but are not appraisals. Agents providing CMAs may benefit from higher values (higher commission) or may undervalue to get quick sale. Consider the source when evaluating.

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Automated Valuation Model (AVM)

Computer-generated estimate using algorithms, public records, and market data. No human inspection or analysis.Examples: Zillow Zestimate, Redfin Estimate, bank AVM tools.
Algorithm analyzes:
  • Public records (square footage, lot size, age)
  • Recent sales in area
  • Tax assessments
  • Listing history
  • Market trends
Generates estimated value and confidence score.
  • Instant results
  • Free or low cost
  • Covers most properties
  • Useful for quick estimates
  • Updates regularly
  • Consistent methodology
  • Cannot see inside property
  • Doesn’t know about renovations
  • Misses unique features
  • Accuracy varies significantly
  • Can be wildly wrong
  • Based on potentially outdated data
  • No accountability
Zillow reports median error of about 2-7% for on-market homes, higher for off-market.What this means:
  • Half of estimates are off by more than this amount
  • Individual property errors can be 10-20%+
  • Unique properties have higher error rates
  • Recently renovated homes often undervalued
  • Unusual markets have less accuracy
  • General ballpark estimate
  • Monitoring value over time
  • Preliminary research
  • Comparing neighborhoods
Not appropriate for:
  • Setting listing price (without other data)
  • Making offers
  • Legal or lending purposes
  • Insurance coverage decisions
Online estimates (Zestimates, etc.) can be significantly wrong. They cannot see inside your home, don’t know about renovations, and rely on potentially outdated public records. Use as rough guide only.

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Broker Price Opinion (BPO)

Valuation by licensed real estate broker, less detailed than appraisal. Often includes exterior inspection only.Used primarily by lenders for internal decisions, not for mortgage origination.
Drive-by BPO: Exterior inspection only. Agent views from street.Interior BPO: Agent enters property to assess condition and features.Desktop BPO: No inspection. Based on data and photos only.
  • Short sale decisions
  • Foreclosure valuations
  • REO (bank-owned) pricing
  • Portfolio monitoring
  • HELOC reviews
  • Loss mitigation
Not used for mortgage origination (appraisal required).
FactorBPOAppraisal
CreatorReal estate brokerLicensed appraiser
Cost$50 - $150$400 - $600
StandardsVariesUSPAP
DetailLimitedComprehensive
InspectionOften exterior onlyFull interior
Mortgage useNoYes

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Tax Assessment

Government valuation for property tax purposes. Performed by county or municipal assessor.Not intended to reflect precise market value.
Assessors use mass appraisal techniques:
  • Statistical models
  • Property characteristics from records
  • Sales data from the area
  • Cost data for construction
Individual properties not inspected annually.
Tax assessment may equal, exceed, or fall below market value.Assessment ratio: Some jurisdictions assess at percentage of market value (e.g., 80%).Timing lag: Assessments may be based on data 1-3 years old.Mass appraisal limitations: Individual property differences may not be captured.
  • Different purpose (taxation vs lending)
  • Different methodology (mass vs individual)
  • Different timing (periodic vs current)
  • Different standards
  • No interior inspection
  • May not reflect recent improvements
Don’t rely on tax assessment for:
  • Listing price
  • Offer amount
  • True market value
Assessment is one data point but should not be primary value indicator.

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Choosing the Right Method

Start with: CMA from experienced local agentConsider adding: Pre-listing appraisal for pricing confidenceUse AVMs for: Ballpark sanity check only
Rely on: Appraisal ordered by lenderUse CMA for: Informing offer strategyUse AVM for: Quick neighborhood research
Required: Appraisal (lender orders)For preliminary estimate: AVM or agent opinion
To challenge assessment: Professional appraisal showing market value is lower than assessed value.
For replacement cost: Appraisal or insurance company’s estimateMarket value differs from replacement cost. Don’t use AVM or CMA for insurance decisions.

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Common Misconceptions

False. Assessments may be higher or lower than market value and often lag current conditions by years.
Sometimes, but often not. Accuracy varies widely by property type and market. Can be off by 10-20% or more.
No. CMAs are helpful but lack independence, standardized methodology, and legal standing of appraisals.
Depends on purpose. For buying, lower appraisal protects from overpaying. For refinancing, higher value helps. Context matters.
Appraisal quality varies. Appraiser experience, local knowledge, and methodology all affect reliability.

Next: Comparing Appraisers

Questions to ask and what to look for

Find Appraisers

Research licensed appraisers in your area