The online home valuation websites are in high demand for spot checking a price. They are fast, easy, and free.
Everyone wants an easy answer, but often the easy answers aren’t all that accurate.
Online home valuation confusion
Sometimes our clients present us with “THE VALUE” of property per one of these free online home valuation websites sites and in some cases, they challenge us to disprove it (Zillow says it, or some other site, so it must be right, goes the thinking). If they want to buy a house which is listed for more than the auto-comped value, it may cause some emotional anguish. And if they want to buy one which is listed for less, they may feel a little giddy – unless multiple offers are looming.
The same is true with home sellers. They agonize when Zillow, Trulia or some other big name site places a worth on their property which is less than what they feel it should be.
Often the best way to respond is to show many of the online valuations and not just the one the client is focused on (often that’s either Zillow or Redfin, but some are attached so some other site’s numbers.
What might surprise a lot of people is the huge discrepancy in values given.
Sample auto comp values online
A good exercise is picking a home that you know fairly well and then seeing what the online home valuation tools say for each one. I picked a home that I know and ran the address through several websites that provide automatic pricing info. Here are the results, from low to high:
Not included in online home valuation study:
Eppraisal $2,072,000 (too high)
Included in the online home valuation study:
Chase $1,721,800
Collateral Analytics (via Realtor.com) $1,671,000
Redfin $1,644,906
CoreLogic (via Realtor.com) $1,631,300
NAR RPR $1,617,440 (subscription only for Realtors)
Zillow $1,580,300
Quantarium (via Realtor.com) $1,566,759
Bank of America $1,504,391
(Please note: the Trulia home value estimator is the same as Zillow’s Zestimate because Zillow owns Trulia.)
From top to bottom, the amount varies by $217,409! That’s a 14% gap between top and bottom. Had we included Eppraisal, it would have been even crazier.
How can the online home valuations disagree so much?
- The location criteria used for the online home valuation can be bad – often a radius of a mile or two is used, and this can push the “comps” into different zip codes, cities or towns, schools districts etc.
- Frequently the desirability and ultimate sales price of a property can go up or down based on micro locations, such as being east or west, north or south of a particular road, school, and so on. The auto comp valuation sites do not know this.
- Remodeling and updates are often not know and not factored in. One of these sites references the last update (assuming they are pulling the permit files to determine this) but it stated that our sample home hadn’t ever been updated when in fact it’s had a lot of remodeling with permits and finals.
- Further, some remodeling will actually lower the probable buyer’s value (even if it was expensive) since what the current owners found to be a wonderful improvement is something that most any other home owner would have to pay to rip out and redo. So even if the permits and finals were factored in, it may not help.
- The time lag can be too long. Right now home values are appreciating pretty fast. If a comp used is more than even 2-3 months old, it will be too low. (In other markets, it might be too high.)
- These sites base their numbers on price per square footage, but there’s a lot more to an accurate pricing than just that! Additions, for instance, usually will not be as significant to the pricing as original square footage. (Think of the ugly additions you may have seen, such as – forgive me – the unappealing “box on top of the garage” expansion.) Homes with enormous 4 or 5 car garages may look the same to those auto comp sites as homes with a 2 car garage, but the oversized auto space may be easy to convert to a secondary dwelling unit, making them valuable to home buyers.
Want to know the true market value of your home in today’s market? The online home value estimators are innately flawed and should not be relied upon.
The most accurate home value estimator isn’t online or sight unseen.
Better choices: either hire an appraiser (who will probably not factor in the pending sales or active competition), or speak with a Realtor who’s full time and active in your area and have him or her visit your home personally, learn about your property, and then provide you the probable buyer’s value for your home. This is often called a Competitive Market Analysis or Comparative Market Analysis (both dubbed CMA).
A CMA should be able to get you to within a very few percent of the sales price, far closer than an online home valuation program. There will still be a range of value because the sales price will change based on the terms of the offer accepted and the exact timing of the sale.
Related reading and links for online home valuations:
Realtor.com provides three online pricing numbers on the same page. Just input the home address and scroll down on that property’s page to where it says RealEstimate.
Request a valuation of your home from us – offer for home owners only, for homes not on the market or sold within the last 6 months. Find out what your house is worth in today’s market.
