Because the Internet never sleeps, it happens all day and all night long. Homeowners, home sellers, and even your Aunt Edith — whether they are simply curious about how much a home is worth or are thinking of selling — will plug an address into an online property value calculators to see what pops up. Sometimes it surprises them on what they find, and other times, not so much.
Online Property Value Calculators
Love it or hate it, real estate information websites (which use public information on a property’s square footage, lot size, beds and baths, tax information) have revolutionized the way buyers look at the value of new and existing homes. Sites like Zillow offer the consumer the ability to challenge the asking price for new or existing homes on the market, arming them with information once used primarily by real estate and title company professionals but not knowing that a LOT more goes into the true value of a given home.
Some sites (especially used in social media) promise the value of a home by first asking for an email address. In addition, others simply flash the value on the screen with no middleman involved. These online property value calculators hope that users will use the “locate an agent” prompt or agent-sponsored ad on the screen.
Even though these computer-generated estimates of a home’s value (also based on previous sales records) are often not even close to what an appraiser would come up with, many consumers prefer to view them that way nonetheless. Today’s homebuyers feel entitled to have estimates about home values at their fingertips whether they understand how that estimate was reached, often using it to determine if it’s time to sell, time to buy or to simply be armed with some information before sitting down with an agent.
How Reliable are Online Property Value Calculators?
While online estimates are good for providing an arbitrary starting point, however, they don’t reflect what the firsthand evaluation by a real estate professional would take into account. Data such as value-adds, updates, and renovations done by sellers are often not included in these values because the house has not been appraised in years (or permits may never have been pulled for improvements). In some cases, even public records have errors in them as well, such misstating the original square footage of the house without any entity correcting it as it changes hands. Now add in value factors like good school districts, the surrounding neighborhood, or stellar views, and the picture might become clearer as to how these programs are simply tools that deal with data, not reality.
Unlike an algorithm, real estate professionals take the home’s condition and subtleties of location and neighborhood into account when weighing the home’s value against other sold and pending comparable homes. Although their estimate is usually closer to the actual value, even that figure can be slightly off, because they can’t know how a given buyer would react to a home having been painted pink inside or when comparing it to a home nearby that just got completely updated. That “willing-seller-willing-buyer” sales price phenomenon is always alive and well.
Online value estimators will also not take into account new commercial areas, new subdivisions, or new multi-family housing construction going on that can influence jobs, services, or traffic — all of which impact the value of a home. Only a living, breathing neighborhood professional, who has paid strict attention to the micro-level changes of a particular neighborhood, could offer this kind of information.
Using Online Property Value Calculators to Help You
Problem is, online estimates without the use of an agent — whether too high or too low — can kill a sale and have even spurred lawsuits by those consumers who took them as gospel valuations despite all the disclaimers plastered all over their web pages.
Logic tells us that it is unrealistic to accurately value a home without seeing the inside of it and knowing the property’s condition, but that doesn’t stop some people from taking a stand. This sometimes pushes Realtors to list their homes for unrealistic prices and then wondering why they’re not getting multiple offers when everything else in the neighborhood is selling like hotcakes. In today’s fast-moving markets, where there is a shortage of listings, past sales are not necessarily bellwethers for what will happen next.
Note: online estimators tend to be at their least effective in rural, waterfront, high-end and extreme lower-end homes, but at their most effective with new production (tract) built neighborhoods, where the value is being newly established. Even then, it may take a while for a builder to find its water level pricing in a newer area. While most do exhaustive feasibility studies before setting prices to please their investors, they also reserve the right to backtrack and offer substantial buyer incentives as well.
In conclusion, the point is to use these online tools with your eyes wide open, considering them as useful as that proverbial grain of salt until you can get together with a live real estate professional whose business it is to know a lot more about value.
Source: Builderonline.com, TBWS