How Accurate Is Your Home's Online Estimate
Who hasn’t checked out online real estate sites for price estimates of their own home, a neighbor’s home, or even a beach house when on vacation? Most of us are guilty as charged!
It’s easy to see why these sites and apps are tempting to use since buyers and sellers can get marketing information directly to their fingertips.
However, keep in mind, these estimates are not as accurate or as consistent as you may think.
As a seller or homeowner, you may be excited to see a high estimate and then be disappointed if a real estate agent sees otherwise.
That’s why you shouldn’t insist your home be priced like your favorite online estimate – you could overprice it and your home could sit too long on the market without any interested buyers.
Here are 5 reasons why online estimates shouldn’t be your only resource for pricing a home as a seller or when scouting homes as a buyer.
Here’s what these sites are doing:
1. Calling estimates a “starting point” when determining a home’s value. What does that even mean? It means you need more information before you can truly price a home. It clearly recommends that you get a comparative market analysis (CMA) from a real estate agent, an appraisal from a professional, and actually visit the home if a buyer.
2. Relying on data and information and not their own assessment of a home. These estimates are calculated by using public and any user-submitted data or corrections. They don’t conduct a physical inspection of a home and don’t have local employees checking them out either. It’s not like an actual real estate agent or appraiser has walked through this home. So if there are any inaccuracies in the public information, it can’t be corrected on the spot.
If a home’s upgrade or renovation hasn’t been reported to a local tax assessor, then these sites won’t even know about it and can’t include it in their estimate. It depends on “users” to provide correct or new information but that’s not always done.
3. Lacking direct knowledge about the local market or your particular neighborhood. Certain neighborhoods can be really hot and in demand, but just a few blocks over in another neighborhood, prices start to drop. Guess what? These sites don’t really differentiate neighborhoods as much as you’d expect. They use data from an area much larger than your neighborhood. Many times they use sales data from an entire county to extrapolate changes in the housing market.
Plus, their systems don’t take into consideration the condition of other homes on the street, if there is a metro that’s within walking distance, or even if the home is on a busy road. That’s why its estimations differ from a CMA, where an agent can incorporate so many other factors when pricing a home.
4. Determining calculations based on a computer system not a person. We’re not knocking computers but sometimes you need that human touch or insight that’s missing from a data-cruncher. Online calculations are based on an algorithm that can only use quantifiable data and not anything subjective – like the quality or the appeal of a home. It can’t “systematically gather and verify” certain information, such as a lovely flat backyard that’s great for entertaining, new granite countertops in an open concept living space, or if that master suite bedroom addition really rocks.
It only knows the number of bathrooms or bedrooms and nothing descriptive about them. Sure, you want to know how many bedrooms a home has, but what about how roomy they are, the size of the closets, and the amount of light from windows? You know what’s special about your home but not a computer.
5. Showing uncertainty by providing a Value Range consisting of a high estimate to a low estimate. For example, if the estimate is $300,000, it could have a Value Range of $260,000 – $340,000. For another $300,000 home, the Value Range could be $285,000 – $320,000. See how the second range is less wide and closer to the estimate?
The wider the range indicates that less data was available for their final calculation. A smaller range between the prices means there was more information to come up with the estimated value. So keep that in mind when looking at estimates and realizing that there might not be enough information for a more accurate estimate.
As you can see, it can be “fun” to check out online estimate sites if you’re curious, but don’t depend on them when the time comes to price your home. You want a professional who knows your specific neighborhood, has walked through your home, and knows how well it will show to buyers. You want a home priced right from the get-go!