What’s the Difference between an Appraisal, your Tax Assessment and the Zillow Zestimate?


If you’re planning to buy a home, an Appraisal is an important step in the process. It’s a professional evaluation of the market value of the home you’d like to buy. In most cases, an appraisal is ordered by the lender to confirm or verify the value of the home prior to lending a buyer money for the purchase. An appraisal for home purchase is looking for the value of the purchase for the lender.  It is not necessarily the “bricks and mortar” value but looks at recent similar sales in the area to justify to the lender that the home has the value of the offer.  The appraiser comes into the home, spends time there measuring the home, analyzing the finishes and then researches past sales to find those most similar. Comparable sales can be like milk, they have a short shelf life. If an appraisal is more than a couple months old, it may not be accurate for the current market. Appraisers are trained professionals. An appraisal typically costs $400-$500.


The Appraisal can be commonly confused with your Tax Assessment. The Tax Assessor rarely enters your home. They may walk around the exterior but determine value by the permits you pull for upgrades and home values around you.  For example, if every home on your block looked exactly the same, and all sold in the past year for the same amount of money, they would value your home just like those. Now, if your basement was finished with an extra bathroom and they didn’t know it, or you dropped in granite counters and they didn’t know it, your assessment may be low. Or, if every other home had a fully upgraded home and yours was still original with laminate counters, hollow core doors and maybe your kids have knocked some holes in the drywall that hadn’t been repaired, your assessment would be too high. Tax value has little to do with market value.


Now we come to the Zillow Zestimate. Put it in the very same category as the Tax Assessment. The Zestimate pulls from public records, and assessed value is publicly recorded.  According to Zillow, most Zestimate’s are “within 10 percent of the selling price of the home.” But Zestimate’s are only as accurate as the data behind them, so if the number of bedrooms or bathrooms in a home, its square footage, or its lot size are inaccurate on Zillow, the Zestimate will be off, just like your Tax Assessment. The Zestimate is an algorithm, Zillow does not enter your home and look it over like an Appraiser or a Realtor will.


How does a Realtor value your home? The process a Realtor uses is like the Appraiser, Realtors look at sales from similar properties and read the market conditions. In a market of rising values, they may price your home to sell for higher than past sales if inventory is low, and demands is high.  In a falling market, they may suggest a lower price to keep your home ahead of the competition. Some Realtors suggest pricing under market pricing to stimulate a “bidding war” on a house to raise the final sale price.


Complicated, yes!  If you use your Zestimate or Tax Assessment to price your home you could be leaving money on the table or over charging, and then run the risk of the home not appraising.