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Of the most difficult aspects of the real estate market is estimating the value of a home. With local conditions changing all the time, it can be hard to accurately price a property. In fact, there’s an entire profession dedicated to appraising homes and determining their value.
With improving online technology, many companies have tried to come up with accurate ways to put a price on individual homes. Here’s how these automated valuation models work, and some of the most popular options.
Using a home value tool
Using these tools is quick and easy — all you need is to provide the address and, in some cases, confirm the basic details about the home. Most work almost instantly, relying on public records to gather the information they need to determine how much a home is worth. That can include the number of bedrooms and bathrooms, the square footage of the home and the size of the lot, as well as local sale records.
However, these tools may not provide the most accurate pricing. Their algorithms can only rely on the information available; they can’t account for things like a home’s condition or renovations made since the last public information was updated. A professional appraiser or real estate agent, however, can visit the home in person, assess the neighborhood as a whole as well as the individual property, perform more detailed research and consider subjective details, so their personalized assessments of fair market value will likely be more accurate than an automated website’s.
To compare each home value tool below, we’ll use the same example property and run it through each home value estimator tool to see how the results compare.
Our example property is 4 School Street in Malden, Massachusetts. At the time of writing, the home was listed for sale at $370,000, which is very close to the national median price for existing home sales — $375,700, as of March 2023. Here is how several leading tools estimated its value, ranging from a bit below list price to well above:
|Bank of America
|$446,600 – $460,099
Chase has a home value estimator that’s easy to use. All you have to do is provide the address of the home; no other information is needed. Its tool allows you to adjust details of the home to see how it influences the value. That lets you correct inaccuracies, such as the wrong number of bedrooms or bathrooms listed. It also gives you the opportunity to see how additions or other home renovations could add to its value.
Zillow’s Zestimate is one of the best-known home value estimators out there, and like with Chase, all you need to use it is the home’s address. Per the company’s website, the median error rate for Zestimates is 2.4 percent for on-market homes and 7.49 percent for off-market homes. It has Zestimates listed for almost every property in the U.S., based on factors including:
- Home details like square footage and number of bedrooms
- On-market data such as the list price, description and comparable homes
- Off-market data like prior sales and tax assessments
- Market trends
Bank of America
Bank of America’s home valuation tool also needs only a street address. It displays basic details of the home, such as the property type, square footage and number of bedrooms, alongside its estimated value. One unique offering here is a value history, showing an estimate of how the home’s value changed over the past 20 years. You can also use the tool to compare the property to similar homes in the area.
Redfin displays its own home value estimates on the home profiles on its website. It says it bases its estimates on more than 500 data points, including information about the home itself, the neighborhood the home is in, the overall real estate market and more. The company states that its margin of error is 2.17 percent for on-market homes and 6.94 percent for off-market homes. It updates the estimates every day for on-market homes and weekly for off-market homes.
Realtor.com also doesn’t require any details beyond the home address. However, to look at more than the most basic details of the home, you’ll need to set up an account on the site and claim the property as yours (which obviously you shouldn’t do unless you own the property). Once you create an account, the dashboard will display more information, including your approximate equity and a history of your home’s value. The history will show separate estimates from three different analytics firms — CoreLogic, Collateral Analytics and Quantarium — giving you the opportunity to compare different perspectives.
RE/MAX, one of the biggest real estate brokerages in the company, starts its estimation process by asking for the address of the property. Then it requests confirmation of a few details, including the number of bedrooms and bathrooms and the square footage of the home. One drawback of this tool is that you cannot include half-baths in the calculation — it only allows for whole numbers. Once you provide the details, the tool displays two automated estimates from two different companies. It also provides a list of comparable homes within the same zip code.
Online real estate platform Ownerly offers a home value estimator, but you must set up an account — and pay for a subscription. However, you can sign up for a seven-day trial membership for $1 or a premium trial for $5. Once you enter the home’s address, you’ll have to answer a few questions, such as whether you own the home in question and details of your ownership and its sales history. When the search completes, you’ll have the chance to create an account, and only then will you be able to see the estimate.
Automated home value estimators can be useful for providing a rough idea of a home’s value, but they can’t replace the human expertise of a real estate agent or professional appraiser. Whether you’re looking to buy a home or sell a home, work with an agent who knows your local market well to get a better understanding of the home’s value.
Online home valuation tools are easy to use and can provide a rough guideline for what a home might be worth. But getting the home professionally appraised is the most accurate way to determine your home’s value.
Online home value estimates can vary widely. Each uses its own algorithm, which takes specific data into account, but none are as accurate as an in-person assessment from a licensed home appraiser. As you can see in the table above, the same house can get vastly different valuations from different online tools.
There are many ways to add value to your home, but not all will be worth the price when it comes time to sell. According to a 2022 report by the National Association of Realtors and the National Association of the Remodeling Industry, the projects that added the most value to a home were refinishing hardwood floors, installing new hardwood floors, upgrading insulation and converting a basement into living space.