There are many different types of valuations, each one measuring something slightly different.
Fair market value (FMV) – A willing buyer and a willing seller, neither of which is under undue pressure to buy or sell, establish fair market value. Unfortunately, FMV is not always accurately reflected in the other forms of valuations.
Appraisals – If you get a mortgage, you are going to get an appraisal. The bank charges you about $500 to send out an appraiser to examine the house and compare it to other similar, recently sold homes. If sales A, B, and C indicate that you are paying a fair price, the appraiser will note that the property you are buying meets or exceeds the price you are paying. Suffice it to say, probably 95% or more of the homes under contract meet or exceed appraisals. In reality the appraisal process is a moderate annoyance.
The appraisal is used by the bank to set the maximum loan amount, so if an appraisal comes in low, it just means the buyer may have to make up the difference in cash. If cash is a constraint, then a missed appraisal can be a big deal. But generally, unique properties or new properties are the only ones that run a high risk of this happening.
Zestimates (or other computer generated models, often called AVM’s or Automated Valuation Models) – Take these estimates with a grain of salt; they are pretty much worthless.
The algorithm used to create the estimates is based on data which is highly suspect, at best. The data that feeds into these numbers comes from a myriad of sources that range from ‘somewhat’ to ‘not really’ reliable. So do your homework and use these valuations at your own risk.
Assessments – Your assessment is the county’s estimate of the value of the property. In reality, the assessment is about collecting maximum tax revenue, so they will value the property high enough that the owner thinks, “hmm… yeah that sounds about right,” but also not so high that they complain. If the county can perfect this number, then they will maximize their revenues and minimize challenges.
Keep in mind that if the home has recently sold, the county will usually set the assessment equal to sales price. Also note that not everyone tells the county about improvements they have made, so these are often not reflected in the assessed value.
CMA – The CMA, or Competitive Market Analysis, is a Realtor’s opinion of value. A properly computed CMA uses a blend of comparable sales, current market conditions, and ‘boots on the ground’ intel to tell you the current market value and the likely price at which a property will sell. The primary difference between a CMA and an appraisal is the ability to use information other than just past sales in the computation.