It’s property appraisal time again. We got our Notice of Appraised Value in the mail last month, and were shocked to learn that our property value increased by 16% last year. That’s on top of the 33% increase from the year before. At least, that’s what the local appraisal district would have you believe. Last year I missed the deadline for filing a protest. You can bet I won’t be missing this year’s.

I called a Realtor friend of mine to get comparable sales information, and then compared that with the proposed appraisal. The difference is quite remarkable. If I’m extremely generous, I can make the house’s market value almost equal to last year’s appraised value. When you take into account the comparable sales and subtract the cost of the many repairs we need to make, the house’s market value is about 1/3 less than the proposed appraisal.

One of the tools I tried to use for research is Zillow. This is a pretty cool mashup that shows satellite pictures with property lines and home prices, along with pertinent information about the houses. Zillow also gives a “Zestimate” of home values. I’m sure there’s some complicated formula for these estimates, but at least in my area I noticed that the estimates are much closer to the tax appraisals than to the sales of comparable homes.

In my experience, tax appraisals are trailing indicators: they continue to rise after home prices have leveled off following a boom, and they continue to fall (although not quite as much as they rise) after falling home prices have leveled off. The result is that sources like Zillow and others end up over- or under-reporting on market swings. For my area, Zillow is reporting values that are quite a bit higher than are justified by actual sales, indicating to me that it relies too heavily on tax appraisals.

As far as I’m concerned–especially in today’s market–the value Zillow reports is the “if everything goes exactly right and you find the perfect buyer” price. It’s a useful tool for comparison, but even then I’d look on it with a large dose of skepticism. As far as absolute values are concerned, though, Zillow’s numbers bear little resemblance to reality.