Nov 3, 2020

The Many Types of Valuations

But Zillow said …
But the assessment is …
Well, my appraisal said …

When it comes time to sell your home, everyone — your agent, your neighbor, the county, the internet, the bank — has an opinion of what it is worth. The pure volume of information can be overwhelming.


At the end of the day, there are three basic things to remember about the sale of your property:

  • The value changes constantly based on thousands of market conditions (interest rates, supply and demand, time of year) the are largely beyond your control
  • Buyers will always seek the best value in the marketplace based on THEIR needs, not yours
  • Your home is worth what someone is willing to pay for it

So when you and your agent sit down and discuss the pricing strategy for your home, remember to look at each of the following types of valuations and not only understand what each valuation measures, but how they are created.

Fair Market Value (FMV)

FAIR MARKET VALUE is the ultimate value at any given moment. FMV is the ‘arms-length’ price that a willing buyer and a willing seller, neither under undue pressure, are willing to exchange the asset for. All other valuation methods are interpretations of FMV.

Source: Buyers and Sellers.
Pros: It is the most accurate.
Cons: none …

Comparative Market Analysis (CMA)

A COMPARATIVE MARKET ANALYSIS (CMA) is a technique that Realtors use to help appropriately price the property that they list. They mostly mirror an appraisal (see below) but can also include data of properties for sale or under contract) to better represent market conditions.

Source: Multiple Listing Service (MLS).
Pros: Best and most recent data. Free. Site visit.
Cons: Not official.

An Appraisal

An APPRAISAL is a report prepared by a licensed professional appraiser on the the Universal Appraisal Report form to determine the valuation for maximum lending purposes. Most appraisals use the most recent applicable property sales (often called ‘Comparable Sales’ or ‘Comps’) to determine the market value of the property using an ‘if a, then b’ methodology. Appraisers are not allowed to use properties currently on the market nor are they allowed to use properties that are under contract in the analysis.

Source: MLS and Public Records.
Pros: Arguably the most accurate. Good information to have, especially when the buyer is likely to use a mortgage to purchase your home. Generally require a site visit.
Cons: $400-500 cost and cannot be used by the buyer’s lender.

Your Assessment

An ASSESSMENT is the value placed on the property by the city or county to determine the amount of taxes the owner is responsible for. Assessments tend to diverge from market values the longer a home goes between sales. Assessments also tend to use data that is anywhere from 12-24 months old.

Source: Public records.
Pros: Good in determining land value. Improvement values are very inconsistent.
Cons: No site visit. Often do not pick up on upgrades or additional finished space.

Zestimates/Automated Valuations (AVM’s)

The ZESTIMATE, or other form of online value estimator (sometimes called an AVM or Automated Valuation Model), is determined by a computer algorithm that uses a combination of sales data, assessments and other information to offer an estimate of a property’s worth. while Zillow’s is the most prevalent, many other AVM’s exist.

Source: Public records and other data feeds.
Pros: Free. Lots of other information on the site.
Cons: Questionable sources and incomplete data leads to questionable conclusions. No site visit.


Remember that each of these numbers represents something slightly different. No one estimate should be viewed as the absolute perfect value for your home.

We like to say that any buyer or seller should use any and all of these values IN their analysis but not any individual value AS their analysis. Understand what each one is telling you and use them accordingly.