Why Relying on Online Home Valuations Can Be Risky
Before Zillow was founded in 2006, homeowners had limited options for estimating their property’s value: they either waited for their annual tax statement or scheduled an appointment with a local real estate professional.
Since Zillow's inception, several sites like Redfin and HomeLight have emerged, offering instant online price evaluations. While it’s convenient to get a quick valuation by simply typing in your address, the key question remains: how accurate are these valuations?
Just like a broken clock is right twice a day, many of these online valuation sites offer similar reliability. Relying solely on their numbers to price your home can lead to serious issues: overpricing could jeopardize your sale, while underpricing could result in significant financial loss. Here are three major reasons why these online valuations often miss the mark:
Time Since Last Sale: The longer it has been since your house last sold, the less accurate the valuation will likely be. Online algorithms use a mix of sources, including public tax records, MLS sales records, and market trends. Homes that haven’t sold in a long time often have outdated tax valuations, dragging down the overall price estimate.
Sparse Neighborhood Sales: Accuracy depends on data, and if few homes have sold in your immediate neighborhood, the algorithm will rely on less comparable properties, skewing the valuation. The demographics and characteristics of nearby areas can significantly impact the accuracy.
Significant Changes to Home Condition: Online estimates struggle with subjective factors like home condition. A home that's been extensively remodeled or one that's fallen into disrepair will often be misvalued. When homeowners tell me, "Zillow says my house is worth X," I ask, "When did Zillow visit your home?" These estimates are typically based on average conditions, not accounting for exceptional upgrades or deterioration.
If you’re seeking an accurate valuation for your home, it’s wise to consider the traditional approach: have a trusted real estate professional visit your property. They can compare your home to actual recent sales in your area, using data from the National Association of Realtors, local MLS, county tax appraisal records, and most importantly, their experience in your neighborhood.
Online data can be a helpful tool, but for precision, nothing beats the insights of a seasoned real estate expert.
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