Bestimates are simple but useful perspectives from local agents about the value of a property. Bestimates, AVMs and CMAs, as defined below, as helpful for initial perspectives on a property but should be considered informationally only. BPOs and appraisals should be considered the minimum due diligence appropriate for making purchase or selling decisions.
|Type of Valuation||Description||Who Performs||Cost|
|Bestimates||A personalized response from a local real estate agent, including narrative comments about a property and, optionally, an estimated value of the property.|
Where multiple agents have provided numerical Bestimates for a property, the information can be shown as an average and as as a range, effectively crowdsourcing an opinion from local agents.
The Bestimate information is based on the agent’s experience with the property or the neighborhood. This experience will vary across agents and agents may not have any special knowledge of the property for which they are providing their perspective.
Agents are not qualified appraisers, so any opinions or pricing stated as a Bestimate should not be relied upon for making an offer or deciding to purchase a property or, for property owners, deciding to sell a property or accepting any offers. HomeAhead recommends using a licensed appraiser before making any decisions or making or accepting any offers.
|Local real estate agents||Free|
|Automated Valuation Model (AVM)|
Zillow’s Zestimate is the most popular AVM but many exist in the market.
|A computerized service that “…can provide real estate property valuations using mathematical modelling combined with a database. Most AVMs calculate a property’s value at a specific point in time by analyzing values of comparable properties. Some also take into account previous surveyor valuations, historical house price movements and user inputs (e.g. number of bedrooms, property improvements, etc.).”|
The problem with AVMs is that simply put, they are automated. They don’t take into account the human element, the present condition of a home, its actual size, views, location, improvements, and more.
There’s a good chance AVMs will not have up-to-date information, including new sales comparables, and they’ll likely compare two homes with dissimilar views, such as oceanfront versus non. In addition, recent improvements may be noted on one comparable, but not the subject, and the present condition of a neighborhood may also be missed. The result can be deceptive and cost banks, lenders, and homeowners thousands.
|Comparative Market Analysis (CMA)||A comparative market analysis (CMA) is an evaluation of similar, recently sold homes (called comparables) that are near a home intended to be bought or sold. Comparative market analyses establish the current market value of the home and are prepared by real estate agents.||Agent or Broker||Free|
|Broker Price Opinion (BPO)||A BPO is performed by a real estate professional who is acting on behalf of a bank or mortgage company. Many factors affect the price of a property:|
characteristics of the individual property, such as structure type, size, room use, age, lot size, and parking
how the property fits into the immediate neighborhood
compliance with local zoning requirements
characteristics of the neighborhood
values of similar properties in the surrounding area
the amount of cleaning, repair, and preparation needed to make the property marketable.
The result is a brief report, usually two or three pages in length. This report includes analysis of the property and neighborhood, photographs, comparable properties (“comps”), and local and regional market information.
A broker may do a “drive-by BPO” or an “interior BPO”. In drive-by BPOs, the professionals do not have access to the interior of the property; they rely on exterior appearance, neighborhood information, comparables, and other documentation. The interior BPO is more in-depth; it requires advanced contact with the property’s inhabitants, evaluation of the interior and exterior, measuring to verify room dimensions, and additional photographs.
|Agent, Broker, or Appraiser||$50 – $150 per BPO|
|Appraisal||An appraisal is the estimation of a home’s market value by a licensed appraiser based on comparable recent sales of homes in the neighborhood. Appraisals are ordered on behalf of a home buyer’s lender to protect the interests of the lender. The lender’s underwriter will compare the appraisal price to the final sale price of the home to ensure the value of the home is equal to or greater than the loan amount. If the home appraises lower than the final sale price, the home buyer may be able to renegotiate a lower price with the seller. If the seller won’t lower the price, the buyer’s lender may ask that the buyer put more money toward their down payment in order to make up the difference.|
An appraisal is different than an assessment. Assessments are conducted by a government employee who evaluates the value of the home to determine how much property tax the homeowner will pay.
|Licensed or Certified Appraiser|
|Notes 1, 2, 3, 4, 5|