Many home buyers are familiar with
home value estimates from real estate web portals such as realtor.com, Zillow
and Trulia (same company), and others. However, when it comes to online home value
estimates, the No. 1 caveat for home buyers is that these estimates are not a
substitute for formal appraisals, comparative market analyses and the in-depth
expertise of real estate professionals. Solely or too heavily relying on just
one price estimate will likely skew the views of a particular property’s true
market value. And if you rely on these
estimates to make an offer on a property, it will likely cause you to lose the
deal.
Online home value estimates are
based on information on the internet. In real estate, access to property
details and values is easier due partly to low-cost immense computing power.
The most popular sources of home value estimates online are those that use automated
valuation models (AVMs). These estimates have varying levels of accuracies
because they depend on the data available to them.
For example, Zillow’s “zestimates”
for North Fork properties often reflect inaccurate values of homes, both on and
off the market. The reason is due to the
fact that our market has a wide range of prices and types of homes but not a
large number of homes and transactions. A statistically valid model is
difficult if not impossible to create without additional input.
Over the
past several years, I have seen homes have 30% to over 100% variances with the
true value and the “zestimate” and in most cases the “zestimate” is below
market value. Most recently an impeccable home marketed at close to a million
dollars, had a “zestimate” of $732,000. When I researched the 7 homes used to
calculate the “zestimate” included was a home sold at $329,000 which was a
small home in disrepair. When this home
was removed from the array used by Zillow, the new “zestimate” increased over
20% to $889,000. When another home valued at $450,000 was also removed, the
“zestimate increased to $992,000 – virtually, the asking price.
When you are looking at these
online valuations, it’s important to know that these estimates have varying
levels of accuracies and should not take the place of appraisals and realtor
comparative analyses based on the local market.
We are happy to prepare a current,
detailed comparative market analysis for any home you wish to buy or sell in
our marketplace. Call us at 631 765 5333 or visit us at our office on the
corner of Horton’s Lane and Main Road in Southold.
Sources consulted: RISMedia.com and the Center for REALTOR® Development (CRD).
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