Technology - Our Friend - and sometimes, not so much. I recall my earliest experiences with potential sellers - and buyers - coming to me, armed with Internet Proven Facts - IPF's, as I like to call them, Zestimate in hand, ready to take on the market. And I, like each of my real estate pro friends did the very same thing: We chuckled.
Information is a great, and sometimes dangerous thing, especially when there is too narrow a slice of it. As a consumer, it's important to understand the limitations of the consumer-facing internet tools that provide some form of an "AVM" - Automatic Valuation Model. Here's a great example for a house that I recently sold:
Zillow Zestimate: $390,190
Trulia states: The property has a lot size of 1 acre. The average list price for similar homes for sale is $1,157,800
Chase Home Value Estimator: $301,710--$376,290 Est. Value
Envelope Please: The house sold for $475,000 one year ago, the market is decidedly up, and an interested buyer just approached my client offering over $600,000. So there you have it - all over the place.
This is not to say that the information gleaned from these services is inherently wrong or useless. There are times when these estimates are right on the mark. I often find that this happens when one is referring to a subdivision home, located in an area of similar subdivision homes, where there are no drastically devalued areas within one mile. For example - a typical logirithm written into an estimating tool will be looking for similarities in size, age, proximity to shopping areas, parks, amenities... but how, exactly does a computer know that the North side of the Hwy is significantly less desireable, than homes, within a few short blocks, on the South side of the Hwy? It doesn't - it can't - and there are human reasons why some neighborhoods, and some properties create specific appeal - or don't. A simple computer estimator, for example, can't know that one, almost identical looking neighborhood has less appeal than another neighborhood only 5 blocks away, because one of them is upwind of a local brewery enjoying the odor of burnt hops all afternoon - or perhaps that one development was built by the top builder in town, and the other has been plagued by issues of "Chinese Drywall" or other construction defects. It takes an experienced local Realtor to know, and tell you these things. You're not going to find these facts on the internet.
A computer can only look at numbers and statistics, and the estimate is only as good as the information that it pulls from. In many cases, we find that the sources used to create the estimate were flawed to begin with - inaccuracies in tax records, or, simply, a problem with merging data sources whose data fields don't match up nicely with the program's query - It's a "Garbage In - Garbage Out" data situation.
So at best, these internet estimates are clues - places to start asking questions, rather than hills to plant one's flag upon, or reasons to get stubbornly entrenched and invested in the factual basis of these figures. Got an Estimate? Great! Let's start there, and look at all of the factors influencing the price of your home (or desired home). It's important to remember that market valuation is an art, as much as a science, and best left to a collaborative process involving a truly open-minded Realtor, historical data factoring in several approaches to the market, local knowledge and key information influencing that specific location, and the current trends of buyers and sellers - supply and demand. All of these things are necessary for a serious analysis of your property. Computer estimates are fun, and an often useful piece of the puzzle - but don't stake your net worth on them....just yet.