Interested in FREE home appraisals?
I’ve seen more and more ads lately for FREE home appraisals or “What’s your home worth” advertisements and thought I’d talk about them today to see how legit they are. If you are going to be getting a refinance loan or maybe you’ll be buying a home and think that maybe the ads you see for FREE home appraisals will work for you, you may want to think again.
What is an appraisal?
Are these ads promising a real appraisal? The basic definition of an appraisal states that it is “The act or process of estimating value”. In the simplest meaning of the word it’s possible that anyone who estimates the value of something could be called an appraiser, and they could provide a report of their estimate, but can that report be used for anything?
The majority of the time that I see ads for FREE home appraisals they are promoted by real estate agents. Agents may also have “What’s My Home Worth” ads that offer to provide a value for your home. It is my guess that agents are not promoting themselves as appraisers, but are instead offering to provide information to potential home sellers on what they should list their home for. This is not a true appraisal but is a Comparative Market Analysis or CMA.
It typically includes information on recently sold homes, current active listings, pending sales, withdrawn and cancelled listings, and expired listings. The CMA is usually a qualitative comparison because actual dollar adjustments are rarely used. This is not a rule, however I have never seen a CMA where adjustments were applied. Because the CMA is not an appraisal it cannot be used by lenders to make a loan. Another product that agents provide is a Broker Price Opinion (BPO). I’ve explained the differences between appraisals, CMA’s, and BPO’s in the past so I won’t spend a lot of time on that here.
Zillow and FREE home appraisals
In addition to what real estate agents offer, Zillow and Trulia also promotes their own version of FREE home appraisals with Zillow’s product called a zestimate. As I have written about previously, zestimates have their own drawbacks which are many.
Zestimates are very limited in scope because there is no actual person that inspects your property. In addition to the
extremely limited information that Zillow has about your property they make some pretty crazy assumptions based on county records regarding the size of your home, which we know can be totally wrong.
Everybody talks about price per square foot but Zillow takes this often misunderstood method of comparison to new lows in order to calculate a zestimate for your home. The one thing worse than not knowing what your home is worth is being given a wrong estimate of the market value of your most important asset. A wrong estimate can lead you to make plans and assumptions that shouldn’t be made such as what you can sell your home for or what the bank will lend you.
You get what you pay for
If you want to find out the true market value of your home the best way is to hire a professional appraiser. They will know the real estate market you live in, will get all the correct and accurate information about your home, and arrive at a market derived value that can be used in buying or selling your home.
While there are a lot of very good agents that can help you with setting a list price for your home, sometimes there is a need to get an appraiser involved in the process, either with a pre-listing appraisal or floor plan sketch.
If I can be of assistance to you feel free to give me a call.
Questions
Have you ever used a FREE home appraisal service? If so did it help you, or was it worth what you paid? I’d like to hear your story so please leave a comment below. As always, thanks for reading.
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Per the main article; Zillow strikes again! I hear this all the time, and it’s the first site many home owners now go to, when inquiring about value. My standard appraisal response seems to be effective so this is what I always say about Zillow these days; Zillow uses a mass assessment approach to valuation, while an appraiser like myself uses a micro and detailed approach to valuation with better more accurate matching of limited data. Zillow purposefully states higher value through a complex array of technical and math settings. They do that to drive more web hits, and people keep on going back as a result. The data is unreliable and you cannot make well informed consumer decisions for individual financial interests based on mass assessment approaches. “When comps miss the mark, they can hurt”. Good one. Saved the picture to my special appraisal cartoon file. Here is another wonderful appraisal cartoon I found on another appraisers blog; http://www.millersamuel.com/files/2014/09/appraisalreviewcartoon.png / You have a good one.
I usually explain that Zillow uses county records square foot data and because that is wrong most of the time so is the zestimate.
Here is the email I sent to an amc trying to broadcast orders just today. Copied below. Apparently they think my services are free, up until the point when I am the lucky recipient of an appraisal order. Newsflash, that’s not how it works. LOL Colorado is completely out of control right now. I tell them to think of the inadequate supply in CO as a glimpse into the future of appraisal distribution nationally. Linked to your website via appraisersblogs article. Thanks Tom.
(In response to bid request email)
Saving the borrower or client a dollar has never been, and will never be, the appraisers responsibility.
Come correct with notes of high and appealing fee and turn times, pre negotiate the deal, assign the order directly, and that’s how to do it correctly.
Please consider me permanently unavailable for individual quote requests, until you hear otherwise directly from me.
I’ve got entirely too many direct assignments to even pay attention to fee quotes. Competing with other appraisers is for the birds, I’ve got entirely too much on my plate just keeping up with the demands of this industry.
If this job was easy, more people would do it. Nobody new comes in, because these distribution processes of per diem bid quoting are beyond absurd.
I double dog dare you to quit your job and strike out as a sole proprietor, and then try to stay afloat by undercutting the competition. Triple dog dare you to try that. You can’t build a business around a question mark. Undercutting is unethical. Your company does understand appraisal is all about ethics right?
If I did officially sign up with your company, please place me on 2 years vacation setting. If you’re just emailing me randomly with broadcast requests, please delete my email from your sending list.
If your company bests the competition and gets standard fees up to $850+ and 2 weeks standard turn time, please feel to ring me back. That’s how much it will take for me to be able to hire any help to meet this seemingly never ending demand. 2 years of 70+ hour weeks is quite enough for me. At best I do 3 a week, and usually I can only manage 2 a week. Those are the realities of this business for careful, considerate, highly reliable, and highly detailed appraisers like myself.
Or keep calling down the line and emailing to infinity, risking lender relationships in the process. It’s your show, run it how you want to. I’ll do the same.
You forgot to name the lender whom this request was for in your fee quote. Not all lenders are equal, and some represent a tremendous difference in time expenditure than the next. Details matter.
I agree with you about broadcast emails Baggins. I rarely accept them unless the fee is C & R and the turn time is reasonable.
I’ve never seen one of these ads before. Just what we need since most of my clients think their homes are worth more than they really are. I already have trouble enough with people quoting a Zillow figure, now we’ve got to contend with these free appraisals. Calling them appraisals, when they obviously aren’t, will give them more legitimacy in the eyes of a homeowner.
I agree Robert. I think it could confuse consumers into thinking that what is being offered is something that can be used at the bank. But it can give us an opportunity to educate clients if they ever asked us about it. I think this is a great way to built relationships and educate others.
On a somewhat related note, I always get a kick out of radio ads that say, “And your appraisal will be free.” Probably not. I remember years ago a company advertising a “free appraisal”, but then the Borrower wondered why he had to cut me a check. It was definitely false advertising on the part of the company.
I use to hear the mortgage company or bank ads for free appraisals too. I decided I didn’t want to do work for those companies because they were probably shorting the appraiser on a normal fee and probably asking them to do it at a deep discount.
Great post Tom. I’ve been seeing many adds pop up as well offing free home values. I like when you said, “The one thing worse than not knowing what your home is worth is being given a wrong estimate.” That is very true. Everyday, someone tells me, “Zillow said…” and I have to explain that it means almost nothing to me what Zillow said.
Thanks Gary. I think these types of ads can be detrimental to the public’s view of appraisers because when we come along and tell them the fee they’re comparing it to the free offer when we all know that the free appraisal is not really anything that can be used.