How Accurate Is Your Home’s Online Estimate?

Today we’re going to get real about those sites that real estate agents hate. I like you, so I’ll give you a hint: one starts with Z, two start with R and they all end in .com. How accurate IS your home’s online estimate?

I mean, who has not 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? I mean, if you haven’t done that ever, call me impressed!

It’s easy to see why these sites and apps are tempting. Buyers and sellers can get marketing information directly at their fingertips.

That being said, these estimates are not as accurate or as consistent as these sites want you to believe. I mean this 2016 article title says it all “Zestimiss: Why did CEO Spencer Rascoff’s home sell for 40% less than Zillow estimate of $1.75M?”

That’s why you shouldn’t insist your home be priced at your favorite online estimate. You could overprice it, and your home could sit too long on the market without any interested buyers. Alternatively, the number may be too low! You might miss out on banking thousands of dollars in equity when you sell.

Here are 5 reasons why online estimates should not be your only resource for pricing a home as a seller or when scouting homes as a buyer. Here are some of the methods they use:

1. Calling estimates a “starting point” when determining a home’s value.

What does that even mean? I’ll tell you what it means. Translation: This number we’re providing may or may not be in the ballpark so you can’t really trust it.

Which means, to get a more accurate analysis of what your home is really worth, a licensed professional, such as a real estate agent or an appraiser needs to actually see the inside of your home and compare it against recent sales in your area.

Why is that important? Because every home is different. From where exactly your lot sits in the neighborhood to what upgrades you have completed or that 2004 bathroom that you haven’t touched. Corner lot? Now we’re cooking with gas!

These aspects of your home all affect the market value.

On top of that, buyer demand often commands prices, higher or lower, different than what the most recent sales would suggest. You need someone who knows what is going on behind the scenes to bring the demand factor to the pricing table as well.

2. Relying on data and information and not their own assessment of a home.

These estimates are calculated using public and any user-submitted data or corrections. The computer does not conduct a physical inspection of a home. If there are any inaccuracies in the public information, it cannot be corrected on the spot.

Square footage from the tax records, for example, are notoriously incorrect and that is a huge factor in an online assessment of your home. Especially if you’ve added any square footage to your home that is not reflected in the tax records, your online estimate will be incorrect.

3. Lacking direct knowledge about the local market or your particular neighborhood.

Certain neighborhoods can be really hot and in demand. Just a few blocks over in another neighborhood, prices start to drop. An online estimate cannot differentiate by neighborhood as much as you would expect.

They use aggregated 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.

Just in Wayne County alone, think about the different areas and whether you could just throw all that data into the Kitchen Aid mixer and get an accurate representation of value. Uh, uh. Probably not.

Plus, their systems don’t consider the condition of other homes on the street. It doesn’t consider whether there is a feature your home has that others don’t have or even if the home is on a busy road.

For these reasons, it is best to have a professional physically go to your home, look around and put together a market analysis showing you how your home compares to other homes in your immediate area.

4. Determining calculations based on a computer system, not a person.

Computers are helpful for so many things such as shopping, writing articles, going down rabbit holes taking “which Star Wars character are you?” quizzes, and sharing your latest escapades with the world. (Drop a comment if you want to share your SW character. I’m Admiral Akbar, which should make you feel really comfortable in my capabilities of winning you a house or coordinating an attack on a space station.)

Unfortunately, as far as real estate market value estimates, computers lack the ability to pick up the nuances that really impact the value of a home. For this reason, when it comes to accurate pricing, human insight wins over the 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. You know, that “je ne sais quoi” that draws you in.

It can’t “systematically gather and verify” certain information. For example, a kickass backyard that’s perfect for entertaining, quartz countertops in an open concept living space, or a master-suite bedroom addition really rocks.

The algorithm only knows the number of bathrooms or bedrooms and nothing descriptive about them. It doesn’t notice that the tile is pink with black trim that was the height of elegance in the 1980s. Ditto for those gorgeous new cabinets you put in your kitchen. To summarize, the algorithm has no concept of taste.

Sure, you want to know how many bedrooms a home has, but what about the other factors? How roomy are they? How big are the closets? How much light streams in from the windows? You know what is special about your home. A great agent can identify what’s special about your home. Unfortunately, a computer cannot account for the peculiarities of human taste!

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 smaller and closer to the estimate?

I went and checked one one popular site, and laughed out loud when I saw my range. My home value has a six digit value range. Is $100,000+ swing even considered a range? That’s like throwing a dart at the side of a barn and calling it good if you hit the wall. This garbage doesn’t fly with me.

Unfortunately, the wider the range indicates that less data is 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.

So, how accurate is your home’s online assessment? Often times, not very accurate at all.

As you can see, it can be “fun” to check out online estimate sites if you are curious, but don’t depend on them when the time comes to price your home or buy one.

In conclusion, if you want to know what your home is worth, even if you aren’t selling anytime soon, reach out and I can do a quick walk-through of your home and provide a more accurate number for you. I don’t charge for this service, and you’ll come away with a better sense of your home’s true value in today’s market.

Photo by Polina Zimmerman from Pexels