3 Reasons Why Home Valuations Are Flawed

Homeowners may be led astray due to online home valuations. Here’s why.

There are a lot of websites now that claim to be able to tell you what your home might be worth. However, are they reliable? Today we will explain why these online valuation models are not the best sources when it comes to finding the actual market value of your home:

1. Their values are estimates. Let's use Zillow as an easy example. They refer to their values as "Zestimates”. Zillow tells us right upfront that their valuation process only produces estimates. The question is how do they create their estimates. Like other online tools, they gather data from multiple sources, such as active listings, sold data that they get from the MLS, county data, and even information entered by the property owner. Some of their sources sound, and may be, logical; however, Zillow does not validate any of it. It is not uncommon to have incorrect data recorded at the county or a property owner enter MLS information that contains errors. Because Zillow simply inputs data into a computer algorithm without verification of accuracy, they lack a real understanding of the local real estate market. As a result, they base their estimate of value on inaccurate and/or misleading data.

"Online home valuations typically gather data from different sources without validating any of the information."

2. They rely on off-market information. Properties that are not currently for sale are considered "off-market". The data for those homes is clearly not current. For example, room additions, updates/upgrades, age of major systems, and needed repairs cannot be factored in the numbers. Using off-market data as part of a valuation process will result in inaccurate home values. Even Zillow admits that most Zestimates are within 10% of the selling price of a home. So, if your home sells for $400,000 and you were relying on the Zestimate for guidance, you may have under priced it or overpriced it by $40,000...either way that is a lot of money and will lead to disappointment.

3. It’s not an appraisal. Zillow's website will tell you that their estimate of your home's value should not be considered as appraisal by any means. In fact, they advise that you contact a local real estate professional to guide you on accurate market value guidance. Before you get the wrong idea in your head regarding your, or someone else's, property we recommend that you contact the local real estate professional first.

If you are curious about the accuracy of Zillow's estimated value for your property send me the number from their website and I will share my professional perspective using today's market data. It may be interesting to know the level of accuracy for your specific home. 

Whether you are buying or selling, our team can provide you with accurate market analysis. Reach out to us by giving us a call or sending an email. We would love to be of assistance with your real estate goals.

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