Are Instant Home Valuations Reliable? Testing the Question!
How much is your home worth?
To obtain instant home valuations, we visited six different websites and ran their algorithms on the same home. The home is located on NW 49th Manor in Coral Springs, Florida and was our home for twenty one years. Therefore, I know the home intimately. It has approximately 3000 sq. ft. of living space and 4500 sq. ft. of total space, a large paver patio area with pool and spa, and an updated kitchen. Since it backs onto a small lake, it has a competitive advantage. Here are our results:
- Zillow $575.669
- Chase 538,000
- Redfin 563,236
- Eppraisal 531.382
- Re/MAX 548,500
- Trulia 597,900
The spread between the lowest price and the highest is $66,518. The highest estimate of value is over 12.5% above the lowest. Therefore, clearly, we consider these estimates to vary too much to be relied upon. (Note: Because Trulia is a subsidiary of Zillow, in our experience, the instant valuations offered by both sites tend to inflate price estimates.)
Look at value from a buyer’s perspective. You have decided to buy a home. Therefore, you begin by considering the neighborhood you would want to live in. Of course, you do this because you are looking for a lifestyle that will make your family happy. Therefore, your prime concern is location, location, location. Then, having selected a neighborhood, you turn your attention to other factors. For example, you look for a floor plan that will best serve your family’s needs and the amenities you desire. Next you request showings of homes that appear to meet your needs and desires.
Then other factors come into play. Certainly, your first impression is influenced by a home’s curb appeal. If a home is clean and well organized, you may conclude that it is well maintained. Additionally, you may believe that it is in sound physical condition, though inspections are needed to confirm that. Also, if you find that it has a neutral color scheme, you may feel comfortable that your family will enjoy the living environment. But smells may entice or repel you.
Of course, if a home has an updated, state of the art kitchen, the chef in you may be thrilled. On the other hand, you may be disappointed to find that the kitchen lacks certain desired features. All these factors and many more form the mosaic that goes into determining a home’s value.
Why instant home valuation are not ideal:
However, instant home valuations cannot take most of these factors into consideration. This is because they are generated by AVMs (automated home valuation models). AVMs utilize mathematical algorithms to analyze a home’s value. Therefore, they rely on programmed assumptions and consider only superficial data, like what nearby homes of similar square footage have sold for. Since they rely on limited data, they compute only rough guesses. As a result, slight variations in the assumptions algorithms employ can cause significant differences in instant home valuations they produce.
So how much is your home worth? To be sure, you would not be wise to rely on a rough guess if you are considering selling:
- Would you accept basing the pricing of your home on less than reliable information?
- Pricing your home too high may cause it to languish on the market unsold. Do you consider that a tolerable risk?
- Are you willing to endure losing thousands by pricing your home too low?
Of course not. Therefore, don’t settle for anything less than a free, professionally prepared comparative market analysis. Insist on the more reliable information it delivers.