In the hot real estate market we are experiencing, the best answer is ‘sometimes’. In recent years, a proliferation of online resources has emerged to provide you with an answer before you ever consult a real estate professional. While consumers have access to more information than they could have imagined a decade ago, that doesn’t mean you can expect an on-line valuation tool to deliver the final word on your home’s value. From Zillow, Trulia, Redfin, and the newly-launched iAppraisal, all on-line valuation platforms will be using different sets of criteria and algorithms to come up with an estimated value. The variation in the data is a good reminder that any estimate of home value, whether provided by an agent or an on-line valuation, is just that – an estimate. The final price will be determined by condition of your home (including updates), views, market conditions, and number of competing properties.
Computers and agents may disagree, for example, about which recently sold homes are truly comparable. Plus, when it comes time to negotiate the sale, the negotiation skills of buyers and sellers (or their agents) may come into play.
“Opinions of value, there are a lot of them”, says Stan Humphries, chief analytics officer for Zillow, which pioneered the practice of estimating and publishing home values in 2006. “If you were to sell the same house 100 different times with different buyers and sellers, it would close at a different price”.
That means if you are looking at estimates for your home’s value, you have to consider what kind of data went into that estimate. If your home is unique compared to others in the neighborhood, for example, the choice of “comps”, or comparable homes, would be a challenge to find. Your estimate may also be less accurate than if you live in a neighborhood where all the homes are similar. If there have been lots of recent home sales in your area, there is going to be more data to work with than if there are fewer sales, and therefore you will get a more accurate estimate.
“The more the house is an outlier, the more difficult it is for anyone to price it, whether it is a human or a computer”, says Glenn Kelman, CEO of Redfin, which has its own automated estimate tool. “The hardest things we had to deal with was which homes are comparable and which aren’t”.
All the online tools take advantage of publicly available data, which they then run through computer models to derive estimates of value. Exactly which data is used is proprietary, as are the formulas used to crunch it, but among the data sources are public records and the multiple listing services used by real estate agents. Exactly what data is available also affects the accuracy of the estimate, and that amount of data varies by municipality and sometimes by home.
Zillow allows consumers who register for a free account to correct or add data about their homes, and also has a Price This Home tool, which lets consumers receive a private estimate in which they control which comps are used. Redfin shows the comps and public records data about the home that was used, and you can email if you believe the information is inaccurate.
What’s unique about the iAppraisal valuation tool is that the interactive platform allows you to review and select the comparables and adjust for your home’s location and condition, providing you with a customized report.
Zillow covers about 100 million homes in 450 markets. Humphreys says the national margin of error for home values is 7.9 percent, but the rate varies by location. That’s partly because the type and accuracy of data varies, but also because home values are easier to estimate in an area with more sales and in areas with a larger volume of homes. “You’re dealing with less data than you’d like to have”, Humphries says of some areas. Parts of New York state, for example, don’t list square footage in public records.
He points out that real estate agents doing comparative market analysis have an error rate of 5.5 to 6 percent, and it’s rare that a home sells for the exact asking price. “No one’s error rate is zero. They’re all opinions of value”, Humphries says.
Glenn says Redfin’s estimates have a median error rate of 1.96 percent for homes on the market and 6.23 percent for homes not on the market, but the service so far covers only about 40 million homes in 35 major metro areas, which are often easier to value than homes in less dense areas.
The representatives of all the companies stress that their numbers are merely estimates, based on the available data, plus a number of assumptions about comparable sales. While all the services throw out a number for the home’s estimated value, most provide a range of values, which sometimes get overlooked by consumers who focus on the number in big type.
“We think of our estimate as the beginning of a conversation, not the end”, Kelman says. “Many times the asking price of a home is the result of a fairly tense conversation between the owner of the home and the agent who is trying to sell it.”
Source: US News – 7 Online Tools to Help You Estimate Your Home’s Value
In summary, things to consider when getting ready to sell your home include:
- The agent doesn’t set the price for your home, the market does.
- You should select an agent based on a proven track record, not price.
- Be wary of an agent who says ‘let’s try it’ at your ‘happy hopeful price’. In this case, the agent is ‘buying your listing’ and doesn’t really care when your house sells, as it is a lead-development tool for them by getting free buyer business from your listing. It is important to remember that you are only ‘new’ on the market one time and buyers will negotiate against you if you have longer days on market (or worse, think something is wrong with your house if it hasn’t sold in a reasonable period of time.)
- A list of their home sales that includes their Days on Market and Sales Price to List Price ratio. This track record will clearly show you if they understand the market and now how to help position you correctly in the marketplace.
- A ‘Guarantee of Services’ that includes being able to cancel the listing if you are not happy.
- A list of references from home sellers that have worked with you.
- Be invested in your outcome by providing:
Your agent should provide the following:
- Professional HD Photography
- Professional Videography
- Professional Staging
- List of carefully vetted vendors to help with house preparation
- Targeted marketing to generate the best response from the market
- A team approach to ensure a higher level of service and results
Please call us if you would like a complimentary customized price analysis for your home. Our analysis will factor in any improvements you have made, as well as other relevant criteria such as location, views, lot size, etc. We look forward to being of help to you!