How do home appraisals compare to other home valuation tools?

Not every mortgage lending situation requires a full home appraisal. According to experts at The Appraisal Foundation, lenders consider the type of loan, property details, and level of lending risk when deciding which appraisal type or valuation tool is most appropriate for assessing a home's value.

Some types of home valuations can only be performed by licensed appraisers, while others are done by real estate agents or computer software.

What home valuations can only licensed appraisers perform?

There are three home appraisal types: full, drive-by, and desktop. The main difference between these types is whether the appraiser visits the home.

• Full appraisals include an interior and exterior inspection of the property. The appraiser inspects the home's features, condition, and improvements and takes notes and photographs. The in-person inspection helps them verify key details directly.
• Drive-by appraisals only involve inspecting the outside of the home. The appraiser examines the home's exterior features and condition. They may walk the property to take photos but do not enter the house.
• Desktop appraisals do not require a physical inspection. Instead of visiting the property or neighborhood, the appraiser completes the appraisal at their office.

All appraisal types involve the same level of in-depth research and analysis of public records, recent comparable sales, market trends, real estate listing photos, MLS data, and maps. Only licensed appraisers are qualified to perform an appraisal and follow strict rules set by the Uniform Standards of Professional Appraisal Practice when completing it.

What are other common home valuation tools besides appraisals?

In addition to traditional appraisals, other home valuation tools are available to lenders and consumers. While typically more accessible and affordable, none offer the same in-depth research and analysis as an appraisal and can only provide a general estimate of a home's value. Still, lenders may use one of these tools based on the loan type or situation.

• Automated valuation models (AVM) estimate a home's value using advanced math and real estate data. Companies that offer AVMs use publicly available data and custom algorithms, meaning results can differ between them. AVMs are most useful for quickly delivering a general estimate of a home's value.
• Broker price opinion (BPO) is a real estate professional's estimate of what a home might sell for. They consider many of the same things that appraisers do, like the home's condition and features, recent sales, market trends, and public records. BPOs are quick and affordable, making them particularly helpful for homeowners looking to set a listing price or decide if refinancing makes sense.
• Comparative market analysis (CMA) is a tool real estate agents use to prepare a general estimate of a home's likely sale price by comparing it to similar homes that have recently sold in the immediate area. Agents mainly use CMAs for home listing and marketing purposes. While some agents charge for a CMA, most provide this service for free to their clients.
• Real estate websites like Zillow or Realtor.com offer automated value tools that combine public data with home details a user provides. Like AVMs, these online estimators use public data and custom algorithms, so results can vary between websites. These tools can be helpful to buyers and sellers who want to get a general idea of price trends.

Whether it's a traditional appraisal or another home valuation option, it's important to understand how they work and what purpose each serves. This can help you know what to expect from each option. Explore more on the home appraisal process, or check out our Home Appraisal Advisor for answers to commonly asked home appraisal questions.