What determines your house's value

Your house's worth is set by what someone would pay for it today, not what you paid for it or what you owe on the mortgage. That price depends on four things: what similar houses nearby sold for recently, the condition of your house, what it can do (bedrooms, bathrooms, lot size), and the local market at this moment.

A house worth $300,000 in one neighborhood might be worth $150,000 in another, even if they look identical. Location drives value more than anything else. A house in poor condition sells for less than an identical one in good shape. And the same house might be worth more in a seller's market (few houses for sale, many buyers) and less in a buyer's market (many houses for sale, few buyers).

The only true measure of value is a sale. Until your house sells, any number is an estimate based on incomplete information. Different methods produce different estimates, and they can vary by tens of thousands of dollars.

Key Takeaways

  • Your house's value is what a buyer would pay for it today, determined by recent sales of similar houses, condition, features, and current market demand.
  • Online estimates (Zillow, Redfin, county assessor) are free but often inaccurate by 5 to 20 percent or more, especially for unusual houses or slow markets.
  • A professional appraisal costs $300 to $500 and is the most reliable estimate, required by lenders but useful for any major decision about your house.
  • A real estate agent's comparative market analysis is free and based on actual sales data, but the agent has financial incentive to list your house higher.
  • Your property tax assessment is not your house's market value—it is a separate number used only to calculate taxes, often much lower than what the house would sell for.

Online estimates: fast, free, and often wrong

Websites like Zillow, Redfin, and Trulia show a number called a "Zestimate" or "home value estimate" within seconds. These are generated by algorithms that look at recent sales of similar houses, property records, and tax data. They are free and they update constantly.

They are also frequently inaccurate. Zillow itself reports that its estimates are within 5 percent of actual sale price about half the time. The other half of the time they are off by more than 5 percent, sometimes by 20 percent or more. The error is worst for unusual houses (a Victorian mansion, a house on a large lot, a house with major renovations), houses in slow markets where few sales happen, and houses that have not sold recently.

Use online estimates as a starting point, not a conclusion. They tell you the ballpark. They do not tell you what your house is worth.

County assessor records: what the government thinks you owe taxes on

Your county assessor maintains a public record of your property, including an assessed value used to calculate property taxes. You can find this through your county assessor's website, usually by searching your address. The record is free and public.

Do not confuse assessed value with market value. They are different numbers serving different purposes. Assessed value is often much lower than what your house would sell for, because assessors use formulas designed to be stable and predictable, not to match current market prices. In some states, assessed value is capped and only increases slowly even as the market moves. In others, it is reassessed every few years and can jump.

The assessor's record is useful for understanding your tax bill and for finding comparable sales (the record lists what nearby houses sold for), but it is not a reliable estimate of what your house is worth on the market.

Real estate agent comparative market analysis

A real estate agent can prepare a comparative market analysis (CMA), which lists recent sales of similar houses in your area and explains why your house is worth more or less than each one. This is free—the agent does it hoping you will list your house with them.

A CMA is based on actual sales data, not algorithms, so it is usually more accurate than online estimates. An agent who knows your neighborhood can explain why one house sold for $320,000 and another for $280,000, and where your house fits. They can also account for recent renovations, condition issues, or unusual features that algorithms miss.

The catch is that agents have financial incentive to estimate high. If they tell you your house is worth $400,000, you are more likely to list with them. If they tell you it is worth $350,000, you might shop around. This does not mean agents lie, but it means their estimate leans optimistic. Get CMAs from at least two agents to see the range.

Professional appraisals: the most reliable option

A professional appraisal is an estimate prepared by a licensed appraiser who inspects your house in person, measures it, photographs it, and compares it to recent sales. Appraisers follow standardized methods and are bound by professional ethics. An appraisal typically costs $300 to $500 and takes one to two weeks.

Lenders require an appraisal before they will give you a mortgage, because they need to know the house is worth at least what they are lending. If you are refinancing, selling, disputing your property tax assessment, or making a major decision about your house, an appraisal is worth the cost.

Appraisals are not perfect—two appraisers might value the same house differently—but they are more reliable than online estimates or agent opinions. An appraiser has no financial stake in the number being high or low. They are paid the same fee regardless of what value they report.

When you need to know your house's value

You need a professional appraisal if you are refinancing a mortgage, because the lender will order one anyway. You should consider one if you are selling, because knowing the true value helps you price the house to sell quickly rather than sitting on the market. You may need one if you are disputing your property tax assessment, because assessors will consider an independent appraisal.

For casual curiosity—wondering what your house is worth in the current market—an online estimate or a free CMA from an agent is enough. For any decision that costs you money or affects a loan, a professional appraisal is the right choice.

How market conditions affect value

The same house is worth different amounts in different markets. In a seller's market, where few houses are for sale and many buyers are competing, prices rise and houses sell quickly. In a buyer's market, where many houses are for sale and few buyers are looking, prices fall and houses sit longer.

Interest rates affect this too. When mortgage rates are low, more people can afford to buy, demand rises, and prices go up. When rates are high, fewer people may have access to for loans, demand falls, and prices drop. A house worth $350,000 when rates are 3 percent might be worth $320,000 when rates are 7 percent, even though nothing about the house changed.

This is why a value estimate is only good for a moment. The market moves. If you got an estimate three months ago and the market has shifted, the estimate may no longer be accurate.

Frequently Asked Questions

Is my property tax assessment the same as my house's market value?

No. Assessed value is used only to calculate property taxes and is often much lower than market value. Some states cap how fast assessed value can rise, so it lags behind actual market prices. Check your county assessor's website to see both numbers.

How accurate are Zillow and Redfin estimates?

Zillow reports its estimates are within 5 percent of sale price about half the time. The other half are off by more than 5 percent, sometimes much more. They work better for common houses in active markets and worse for unusual houses or slow markets. Use them as a starting point, not a final answer.

Should I get an appraisal before I list my house?

It depends on your situation. If you are unsure what price to list at, an appraisal ($300 to $500) can prevent you from pricing too high and sitting on the market for months. If you already have a free CMA from an agent, that may be enough. If your house is unusual or the market is slow, an appraisal is more valuable.

Can I use an online estimate to dispute my property tax assessment?

Assessors usually do not accept online estimates as evidence. If you want to challenge your assessment, gather recent sales of comparable houses from your county records, or get a professional appraisal. Both carry more weight than an algorithm's guess.

What if two appraisers give me different values?

Appraisals are estimates, not exact measurements, so variation is normal. If the difference is small (within 5 percent), both are probably reasonable. If it is large, ask each appraiser to explain their reasoning. You can also get a third appraisal, though that adds cost.