Be Wary of Online Home Value “Estimates”

How much is your house worth? Almost every online real estate portal can deliver your “estimated home value” at the click of a mouse. How awesome does that sound!? But…how accurate are they? Should you list your home according to these online values? Should you make a purchase offer based on the AVM from a third party website? The answer is an enthusiastic NOOOO!
This type of estimated value is called an Automatic Valuation Model (AVM) and is calculated by a formula. Each website’s method is a tad different, so the price estimates can vary like crazy. Check out this chart for a comparison on real life real estate vs. online valuation estimates:

*Averages calculated using AVM data from Zillow.com™, Homes.com® and Realtor.com® on 5 properties that have sold within the last 6 months in Palestine, Texas.

Scary “Estimates” that Cost You BIG Money!

This data was pulled from 5 recent home sales in Palestine, Texas. Scary, huh? AVM values are often vastly different than the true market value. For example, if the seller on Property D were to follow the “advice” of the online valuation, we would have listed at around $97,000. It sold for $132,000 and had multiple competing offers. Just to be clear, this is a $35,000 difference! However, AVM estimates can also go the opposite direction and inflate the value of a property, as in Properties B & C. If the sellers had gone with the AVM price and listed at those prices, they would likely still own them, because the true market value was significantly lower.

Get a Real Estimate from a Pro

No matter where your property lands on the AVM (be it a high or low value), it adds stress because buyers do look at these “valuations” and assume they are correct. Unfortunately, as you can see, these auto values are usually incorrect. AVMs should not be used to determine fair market value of a home. To determine the correct price point for your home, talk to your real estate agent and get a value based on real local data from someone who has boots on the ground and is tapped into what is going on in the market—not random suggestions from robots in Aruba. There is no better weapon in determining value than your Realtor®. Real estate is, and always will be, highly localized. After all, the saying “location, location, location!” isn’t a saying for nothin’.
Lisa E. Priest is skeptical of robots and is a Palestine, Texas Broker /REALTOR® with Picket Fence Realty, Inc. You can reach her via phone or text at 903-948-3343 or read more at BuyPalestine.com.

Be Wary of Online Home Value “Estimates”