How Exact Are Instant Home Value Estimates?
How Exact Are Instant Home Value Estimates?
How much is your property worth? Many real estate websites can give your “estimated home value” with a quick click. Sounds great, right? But…how accurate are they? Should you price your home or make your purchase offer based on these numbers? The answer is a short one—NO!
This type of instant estimated value is called an Automatic Valuation Model (AVM) and is calculated by a formula. Each website’s formulation method is different, so the price estimates can vary depending on how they pull data. Check out this chart for a comparison on real life local real estate sales vs. online valuation estimates:
These Websites Do NOT have access to SOLD data!
The data in the chart above was compiled from 5 recent home sales in Palestine, Texas. These values are inaccurate, to put it mildly. AVM values are often vastly different than the true market value. Texas is a non-disclosure state, which means that sold prices are not published as a matter of public record and so these values are not using comparable sales data. If the sellers had gone with the AVM price and listed at those prices, they would likely still own them, because in most cases, the true market value was significantly lower. However, many properties that have not been recently listed (and therefore the robot calculators have no “baseline” price to go off of) show a value lower than the actual market value because they don’t take into account updated property details.
Local Knowledge Matters
No matter where your property lands on the AVM (be it a high or low value), it adds worry because buyers do look at these “valuations” and unfortunately assume they are appraisals. Unfortunately, as you can see, these pricing models are usually far from valuable. AVMs should not be used to determine fair market value of a home. To determine the correct price point for a property, 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 auto generated fantasy prices. Real estate is hyper localized and the beep-beep-boop online values are not your friend.
Lisa Priest is a fan of true values 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
