- How Do Online Home Value Estimators Work?
- What Can Lead To A Bad Estimate From An Online Home Value Estimator?
- 1. Your Home Has Unique Characteristics
- 2. Your Home Borders Changing Neighborhoods
- 3. Your Home Has Been Renovated Without Permits
- 4. The Market Has Changed Recently
- 5. Homes Don’t Sell Very Often In Your Area
- 6. You Live In An Older Area
- Final Thoughts on the Best Home Value Estimators
Are you about to sell your house and need to figure out how to place a monetary value on your home that your heart says is priceless? Or are you planning to buy a house or refinance and want to check that the price is accurate? If you are starting out on this journey, your first stop will be online home value estimators.
How Do Online Home Value Estimators Work?
Online property valuation tools use the comparative market analysis approach to calculate the possible value of your home. The digital tools collate data from multiple listing services to compare recent sales and listing prices in the area. However, there could be limits to the data-sharing agreement.
The algorithm also pulls information from public records such as tax assessments, property transfers, and ownership deeds. This data helps to predict your property’s value. The automated valuation model won’t account for renovations done since the last refinancing or purchase data. It is also usually offered by a lender or real estate agency, which carries its own biases.
You need to have as much information as you need when making this big decision. Rather you are on the selling or on the buying side, having the home value in your mind will help you negotiate the price or set the right price to attract buyers. While many factors influence why a home is sold, the price is the biggest one.
If you set the price too low, you will leave money on the table. If you set the price too high, the property may be on the market for longer than you can afford or not sold at all.
There are many home valuation tools online that you can use to give you an idea of where to start.
Here are the 11 best home value estimators available, including their drawbacks and tips to avoid getting a bad estimate.
Learn how to sell a house and save thousands with ISoldMyHouse.com. Learn how to sell a house and save thousands with ISoldMyHouse.com. Learn how to sell a house and save thousands with ISoldMyHouse.com.
What Can Lead To A Bad Estimate From An Online Home Value Estimator?
Home value estimators are just that-estimations. The tool’s flaw lies in the fact that it is just a tool. After all, the value of the home is in the buyer or renter. People weigh their decisions based on many invisible factors or personal preferences that the tool cannot take into consideration.
Additionally, the estimation is only as good as the data that is inputted. Different property data is collected in different parts of the U.S., and if there has not been a lot of recently sold properties, then the multiple listing services data will not be an accurate comparison. This data discrepancy can cause home value estimator tools to give inaccurate prices.
Data also does not factor in recent home renovations and other elements in the community that makes it an attractive place to live. Did a new Whole Foods grocery store open nearby? Is there a great dog park where you can take your new puppy too? Do you have friends or family already living in the area? Is your favorite yoga studio nearby? What is the proximity of the home to your office?
Online home value estimators empower buyers and sellers to have more knowledge and information, which can ultimately be leveraged in any real estate conversation or negotiation. However, the tool does not replace the value of a good real estate agent or first-hand knowledge of a property and a community.
All home value estimators include a similar disclaimer that the estimations should be used as a starting point. While Zillow provides the best overall home value estimation and Redfin provides the best for overall accuracy on pricing, they are ultimately just automated models. After you’ve entered your information into these websites, consider what could be missing from the algorithm that may change the home value.
Here are just a few factors to consider when you get your estimated home value from an automated tool:
1. Your Home Has Unique Characteristics
Read more: List of Cities and Towns in Oregon –
If the home has unique elements that are not available at other properties nearby, it makes it harder to compare and calculate an accurate price. For example, if your house is recognized as a historical building when other properties in the area are new builds, then it’s like comparing apples to oranges when you use an online home evaluation such as Eppraisal that depends on only 20 properties to generate its estimation.
A unique feature is also a personal opinion. If you added a wine cooler into your kitchen, but the potential buyer had this in his or her previous place, then it may not seem like anything special to them. No algorithm can replace human intuition when it comes to identifying and pricing the unique characteristics of a home.
2. Your Home Borders Changing Neighborhoods
Is the home in a neighborhood that is quickly gentrifying? Or are the neighborhoods surrounding the home rapidly growing? This type of change is often missed in calculating the home price. You can only discover this knowledge by talking with people living in the area to understand how they feel about the community.
What are the changes the neighborhood has experienced or is currently experiencing? How might this change in the next five to 10 years? For example, is the local municipality rezoning land? Could a new park be built or the area becomes more mixed-used? Has there been a recent spike in crime? This could all drastically change how a home is valued.
3. Your Home Has Been Renovated Without Permits
Did you know that you needed a permit to make home renovations? Small upgrades do not require a permit, but substantial changes like HVAC system overhauls and major structural work could. If you skipped the permitting step, you would run into issues when you try to sell your property without permits.
During this process, you may need a local government official to inspect your house to give you a certificate of occupancy. This confirms the resident is suitable to live in. However, in this process, the officer may notice you’ve made significant home renovations without securing permits, which could result in fines. If you increase the listing price to compensate for these fines, this will make your house less desirable to a buyer.
4. The Market Has Changed Recently
The economy’s health may also impact the listing price. If the country is in a recession with high unemployment, the value of homes may decrease. At the same time, if you are selling your property when the market is growing, your listing price may be inflated.
As your economic teacher said, it is all about supply and demand. If there are more houses on the market and not a lot of demand, the price will be driven down. If there are fewer houses available but a lot of demand, then the price will go up.
5. Homes Don’t Sell Very Often In Your Area
If there are not a lot of homes in the area that have recently sold, then there is not a lot of data for online home value estimators to compare. This will reduce the accuracy of the estimations provided. When estimation tools provide a wide potential price range, this is also an indicator that there was not a lot of data. There may also be external factors why properties have not been sold recently, which you should investigate.
6. You Live In An Older Area
If the neighborhood is undergoing revitalization, you may need to put more effort into increasing the home’s curb appeal to potential buyers. Stage your home and schedule open houses during a time of the day and day of the week that is quiet and will show the neighborhood in the best light. You could even provide driving directions for people that will take them by the most scenic route to the house. The goal is not to deceive but to ensure potential buyers don’t prejudge the neighborhood before falling in love with the home.
Learn how to sell a house and save thousands with ISoldMyHouse.com.
Final Thoughts on the Best Home Value Estimators
After you’ve used several online home value estimators, getting a professional appraisal is important. While Zillow and Redfin provide very good estimations, you will want to go one step further. The listing price is the biggest factor as to why a property will sell quickly or not. Getting the price right is worth the investment in time and resources.
Many of the home value estimators will direct you to real estate agents that can help you move forward in your journey. However, don’t forget, real estate agents will also have biases. If you decide to get a professional appraisal, make sure the agent is truly familiar with the area you are interested in.
If they have not worked and lived in the area for long, how would they know how the community has changed over the past few years and its trajectory in the next decade? After all, buying a home is a long term investment. Please check your agent’s background and share information with them, so they understand what you are looking for and need in your new home. Your real estate agent should become like your best friend.
However, just like online home valuation tools, real estate agents will not always be able to provide all the information you may need to make this big decision. Good algorithms used by companies such as Zillow and Redfin are powerful and able to analyze a lot of data. Therefore, it is recommended you use both methods to ensure you have the most accurate information possible before you put in an offer or list a home.