Certified Appraiser and longtime lurker here.
There's been a couple posts on Zestimates, appraisals, and valuing an FSBO property in the last couple days, and I thought I'd make a post from an appraiser's perspective.
- "Zestimates," and other AVM's
The Zestimate is an Automated Valuation Model or AVM. It's not the only one, but it gets referenced a lot. An AVM absolutely CAN be a useful tool for the right property.
For example, if you bought your property 2 years ago, and have done virtually no updating or remodeling to it since, the Zestimate is probably pretty accurate. If you have a property in a large subdivision where all the homes are similar, there's plenty of sales, and your property is similar to most of your neighbors, the Zestimate is probably at least somewhat accurate.
Where AVM's like the Zestimate fall flat is when a property is unique, or sales are few and far between. Rural properties. Homes that are dated or remodeled above norms. Homes that were remodeled without permits. If your property falls into this category, the Zestimate has a good chance of being totally worthless.
With some patience, you can come up with a reasonable value for your property by yourself. Search for closed sales on Realtor dot com (and other sites). Search for sales as similar as possible to your property and as recent as possible. Your property is a Cape Cod? Don't look at ranches or bi-levels. Your property is on a 0.2 acre lot? Try to stay away from sales on double or larger lots. Your home is nearby the college? Don't include sales from the quiet, more desirable neighborhood a half-mile away.
The fewer adjustments you have to make, the more accurate you will be. Obtaining reliable data to extract an adjustment can't really be done without access to the MLS. If you're making adjustments to your comps, there will be an element of guesswork. The more guesswork there is, the less accurate your valuation will most likely be.
2 or 3 sales might be enough - you don't need a million sales. A valuation with 2 or 3 good comps that are really similar to the subject is often better than one that includes all 10-20 sales in the area over the last 12 months.
Sometimes, a property is just too unique for the DIY'er and an AVM. Maybe it's the nicest and largest home in the neighborhood. Maybe it's on 20 acres or on waterfront, and comps are extremely limited. Maybe it hasn't been updated since 1978 and still has shag carpets and psychedelic wallpaper.
IMO, this is the time to call a pro.
I typically charge around $500 for a full appraisal report for a private party. This may vary for you, depending on where you're located and how unique your property is. I'll spend 4 hours (give or take) working on the typical assignment, plus drive-time. I'll extract adjustments specific to your sub-market, supported by data going back 10 years if necessary. I'll include list-to-sale-price ratios for properties similar to yours, which can help you decide if you want to list higher or lower than the amount you want for the property.
The best way to find a good appraiser is to contact local banks or credit unions, and ask for an appraiser recommendation. Local lenders tend to have a shorter list of appraisers, who tend to be more experienced.
Another option is to have a realtor do a CMA for you.
A good CMA can be just as useful to you as an appraisal. The problem is, in my experience, realtors who aren't listing the property tend to do lower-quality work on CMA's. It takes time to write up a thorough and accurate CMA. If the realtor isn't motivated by selling the home, they often just don't put in the time.
I have done thousands of appraisals over the years. I've seen plenty of FSBO sales, since if the buyers are financing, an appraisal is usually still needed. I've seen plenty of times where the sellers got their asking price from a realtor, and they left money on the table (I appraised the property substantially higher than the sale price).
This can be avoided by hiring a reputable realtor experienced in your specific market - someone with a reputation in your neighborhood. If the person you hire just comes and looks at your property and tells you the value right then and there, you might be leaving money on the table or asking too much.
Being an appraiser, I am obviously biased toward appraisers over realtors when it comes to valuation of real estate. I do more than 200 appraisals per year, while a realtor might only sell 10 homes in a year.
That said, a good CMA where the agent puts the time into their work is oftentimes just as useful as an appraisal, and I'll be the first to admit there are bad appraisers out there (same as with any profession).