How Accurate Is Your Home’s Online Estimate?

Who hasn’t checked out online real estate sites for price estimates of their own home, a neighbor’s home, or even a beach house when on vacation? Most of us are guilty as charged!

It’s easy to see why these sites and apps are tempting since buyers and sellers can get marketing information directly to their fingertips.

However, keep in mind that these estimates are not as accurate or consistent as you may think.

Don’t insist that your home is priced like your favorite online estimate – you could overprice it, and your home could sit too long on the market without any interested buyers, OR you might see a disappointing number online that might be too low given today’s buyer demand.

Here are 5 reasons why online estimates shouldn’t be your only resource for pricing a home or scouting homes as a buyer.

Here’s what these sites are doing:

1. Calling estimates a “starting point” when determining a home’s value. What does that even mean? To get a more accurate analysis of what your home is worth, a licensed professional, such as a real estate agent or an appraiser, needs to see the inside of your home. Why is that important? Because every home is different from where exactly it sits in the neighborhood to what upgrades you’ve done or don’t have compared to the most recent sales. On top of that, buyer demand often commands higher or lower prices than the most recent sales would suggest. You need someone who knows what’s happening behind the scenes to bring the demand factor to the pricing table.
   These estimates are calculated by using public and any user-submitted data or corrections. They don’t conduct a physical inspection of a home, so if there are any inaccuracies in the public information, they can’t be corrected on the spot. Square footage from the tax records, for example, is notoriously incorrect, and that is a huge factor in an online assessment of your home. Especially if you’ve added any square footage to your home that does not reflect in the tax records, your online estimate will be incorrect. You are relying on data and information and not their assessment of a home.
2. They lack direct knowledge about the local market or your particular neighborhood. Specific neighborhoods can be hot and in demand, but prices start to drop just a few blocks over in another neighborhood. An online estimate can’t differentiate communities as much as you’d expect. They use data from an area much more significant than your neighborhood. They often use sales data from an entire county to extrapolate changes in the housing market.
   Plus, their systems don’t consider the condition of other homes on the street, if there is a feature your home has that others don’t, or even if the house is on a busy road. That’s why it’s best to have a professional physically go to your home, look around and put together a market analysis showing how your home compares to other homes.

4. Determine calculations based on a computer system, not a person. Computers are helpful for so many things, but they cannot pick up the nuisances that change the value of a home, which is why human insight wins over the data-cruncher when it comes to accurate pricing. Online calculations are based on an algorithm that can only use quantifiable data and not anything subjective – like a home’s quality or appeal. It can’t “systematically gather and verify” certain information, such as a lovely flat backyard that’s great for entertaining, new granite countertops in an open concept living space, or if that primary bedroom addition rocks.
   It only knows the number of bathrooms or bedrooms and nothing descriptive about them. Sure, you want to know how many bedrooms a home has, but what about how roomy they are, the size of the closets, and the amount of light from the windows? You know what’s special about your home but not a computer.
5. It shows uncertainty by providing a Value Range consisting of a high estimate to a low estimate. For example, if the estimate is $300,000, it could have a Value Range of $260,000 – $340,000. For another $300,000 home, the Value Range could be $285,000 – $320,000. See how the second range is less wide and closer to the estimate?
   The wider the range indicates that less data is available for their final calculation. A smaller range between the prices means there was more information to come up with the estimated value. So keep that in mind when looking at estimates and realizing that there might not be enough information for a more accurate estimate.

As you can see, it can be “fun” to check out online estimate sites if you’re curious, but don’t depend on them when the time comes to price your home. If you want to know what your home is worth, even if you aren’t selling anytime soon, call or email me and I can do a quick walk-through of your home and provide a more accurate number for you quickly and at no cost.