Buyers-and Sellers-Beware!

Buyers-and Sellers-Beware:

Online Home Price Research has Limited Value

by Stephanie Riley

Grim headlines have left many homeowners feeling like the bottom is falling out of the housing market. While the foreclosure numbers are indeed a sad reality in many areas, home values remain steady in older, established neighborhoods throughout Sacramento.Many of us wish there was an easy way to find out just how much our homes are worth-how that investment is holding up. You know, turn on the computer, do a little research, perhaps see what the neighbor's house is worth at the same time.The popularity of real estate websites such as zillow.com, ziprealty.com and trulia.com makes it seem that assessing property values is just a click away.

Can you compare homes online the same way you do cars, for example? According to local real estate broker Tim Collom and marketing expert Greg Bauer, the answer is "not exactly.""Eighty percent of people are going to go online and do some research," suggests Bauer, owner of Bauer 360, an internet marketing and consulting firm in Sacramento. "However, the local professional is going to know more than any of these research tools ever could."

The primary reason for this is the vast differences among homes in older, established neighborhoods.  "It's easier to compare Roseville and Elk Grove homes that are the same square footage and model using these tools," observes Tim Collom of Windermere Dunnigan Associates.

Someone who has never visited your home, or your community for that matter, has no way of knowing that your home has a gourmet kitchen while your neighbor across the street has the original 1930s fixtures. "In these neighborhoods, each home is like a fingerprint...no two are alike," says Collom.

Bauer's research team found that 1/3 of zillow estimates were inaccurate. In the course of helping the firm's clients increase their online presence, Bauer's team specializes in reading between the lines -- online. In a sampling of homes for sale in the neighborhoods of East Sacramento, Land Park, Arden Park and Curtis Park, we found the majority of homes sold 10-20% higher than their Zillow estimate.

Ten to twenty percent isn't bad if you are buying a lawnmower. However, if your home is in the $500,000 range, a 10% difference could mean losing out on $50,000 if you price your home based on one of these online services. Collom states without hesitation, "These programs offer a false baseline of what the seller can expect."

We found one East Sacramento home was valued at $120,000 less than it ultimately sold for the following week. Bauer agrees that this disparity is not uncommon. "As we have studied the real estate vertical, we have noted that websites such as zillow.com do not supply accurate results, therefore making the information false or misleading." Bauer's research shows that the Trulia site is somewhat more on the mark, but points out that these services should merely serve as general starting points.

With about 150 staff, primarily technical experts in Seattle, Zillow tracks public records such as sales and refinancing efforts. Trulia and Ziprealty operate  the same, with no local staff. Paired with price-per-square-foot averages and sales of "comparable" properties, those numbers lead online services to come up with an estimated value of your home.

But wait a minute. What are comparable properties-those with similar square footage and lot size? Those on the same street?

"You can take one street and find vast differences in home values from one block to the next," points out Collom, who notes that homes on either end of H or J Street offer excellent examples of this phenomenon. Nicole Pate of California Prudential Realty agrees that unique qualities of older homes in established areas contribute to their broad appeal, and to the difficulty in estimating value without stepping inside.

Even homes that appear to be similar on paper can be dramatically different in neighborhoods that were not built as tracts using a pattern of four or five floor plans. In the 50 or more years since they were built, each has undoubtedly undergone renovations and changes that further enhance the uniqueness (and yes, value) of these homes.

If it's your curiosity you wish to satisfy, you may be intrigued by the tools available online. Bauer calls Trulia "very content-rich, with an abundant amount of tools, reports, and recent sales to allow you to conduct research." Buyers can begin their research online with Trulia's consumer version of the Multiple Listing Service (MLS), providing detailed information on homes for sale, including prior sale history, comps and assessment records. Recognizing the importance of local insight, Trulia offers links to local brokers and agents, information on neighborhood schools and even a tool that will send you an email when a particular home's sales price is reduced.

If knowledge is power, we consumers should be very careful with the perceived power inherent in this brand of knowledge.

Collom cautions buyers from using an online price as a bargaining chip in the negotiation process, noting that buyers who offer an extremely low bid may not get a response from the seller.

Although local news reports indicate that the real estate market is "down," Collom says established neighborhoods have not felt the same kind of dip. He urges consumers to look for information that pertains to their own neighborhoods, noting the disparity among homes available in Rio Linda and Arden Park-two vastly different areas-but both part of Sacramento County statistics.

"The amount of foreclosures in Sacramento County is not really relevant to established areas," he says. "Sales here are still up, we still have multiple offers on homes, and we still sell homes for more than $2 million in these neighborhoods." Pate agrees with the healthy local market outlook, "Recently, sales have picked up and new listings are coming on the market weekly."

Collom, Pate and Bauer agree that the curious consumer will find a lot of value in online services. When it comes to negotiation, buying or selling, however, each recommends without a doubt that the local expert will always offer the most accurate information.