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THE HONEST BROKER: ARE WEBSITE “VALUATION APPS” ACCURATE?

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THE HONEST BROKER: ARE WEBSITE “VALUATION APPS” ACCURATE?

BY:  DIANE LOTT,  BROKER       PARADISE FOUND REALTY, INC.

Homeowners log into websites to check on the “value” of their home for many reasons.  It may  be out of curiosity, contemplation for possibly listing their home, or to check on equity that might be present. How do these valuation apps work and, are they close in accuracy vs a  Comparative Market Analysis (CMA) performed by a realtor?

Examples of these valuation apps can be found on Zillow, Trulia, etc. The “Zestimate” home valuation tool is Zillow’s estimated market value for a home, computed by using a “proprietary formula”. It is a starting point in determining a home’s value and is not an official appraisal. The “Zestimate” is calculated from public and user-submitted data.

  A “proprietary formula” means a formula to which the owner or developer has all rights and privileges.  In other words, Zillow’s formula uses general tax records data and sales information of properties within a determined square mile radius from the location of interest regardless of community differences, condition, and location.  For example, the home within a high end planned community is compared to, and averaged in with, the sale of a home that is not in that community but falls within the mile radius of the property of interest.

The placement of the address in the search bar offers an average “listing price” for similar homes in the area. Also, the time frame used in the formula can also be significant in evaluating an estimated value. What is the designated number of months’ previous sales information used in the proprietary formulas calculations, 6 months, 9 months, 12 months?   

On the other hand, when a realtor performs a CMA on a home, they use more specific, not generalized criteria. The criteria would include comparing homes within an immediate community or development for more accuracy and uses adjustments by either adding or subtracting features, such as a garage, pool, or the number of bedrooms and baths as well as the square footage of the homes to get to a more accurate valuation. To capture sale trends in the development, the time frame used can be reduced using the last 3-month period, allowing more accuracy.  The summary of the CMA would also include a “sold price/square foot” of other homes that drills down what the seller is looking at for their bottom line on a sale. 

In conclusion, if the homeowner is satisfying a  valuation curiosity, going to a website will provide a ballpark estimate, but should not rely on it for accuracy.  The CMA provides more accuracy than using a website valuation tool and is offered as a free service by real estate companies. 

Be Well!

Diane

Diane Lott, Broker

Owner: Paradise Found Realty

Paradise Found Realty, Inc. of Palm City  

Your concierge real estate company.  Call for your home visit today:  954-294-5060

Call to schedule a visit today:    954-294-5060

Email:  Diane@ParadiseFoundRealtyFl.com

Website:  www.ParadiseFoundRealtyFl.com

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