How Accurate are Online Home Value Estimates?
How Accurate are Online Home Value Estimates?
How Accurate are Online Home Value Estimates?
How much is your property worth? Many real estate websites offer an instant “estimated home value” at the click of a mouse. Sounds great and so easy! But…how accurate are the numbers? Should you sell your home based on the price provided by a website? Should you make a purchase offer based on the AVM from a third party website? The answer is a resounding NO!
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 sales vs. online valuation estimates:
*Averages calculated using AVM data from Zillow.com™on 5 properties that have sold within the last 6 months in Palestine, Texas.
This data was pulled from 5 recent home sales in Palestine, Texas. As you can see…the valuations are not so valuable. AVM values are often vastly different than the true market value. For example, if the seller on Property C were to follow the “advice” of the online valuation to price the property, it would have listed at around $153,500. It sold for $185,000 in less than a week. That is a lot of money to leave on the table! However, AVM estimates can also go the opposite direction and inflate the value of a property, as in Properties D & E. If the sellers had gone with the estimate valuations and listed at those prices, they would likely still own them, because the true market value was significantly lower.
No matter where your property lands on the AVM (be it a high or low value), it adds possible issues because buyers do look at these “values” and mistakenly assume they are accurate. Unfortunately, these auto values are more often than not completely wrong. 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 is knowledgeable about the local market—not random suggestions from random algorithms in internet land. Real estate is, and always will be, a localized specialty. After all, the saying “location, location, location!” is said for a reason!
Lisa Priest likes accurate info 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.
