John's Florida Real Estate Blog

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Don't Become Obsessed With Online Home Value Estimators

Front_view On the internet there is a medical site where people can ask questions of doctors. In the past I used to read some of the questions and the responses from the medical personnel. However, not matter what the answers were, the doctors and the site were very quick to indicate that their answers WERE NOT to take the place of a personal visit and diagnosis with the questioners personal physician. That just makes sense. A lump under your arm could be something as simple as an insect bite or as serious as a cancer, or something between the two in gravity. Only by being examined personally by a doctor and having some tests done, can he or she tell you what is wrong, and what you need to do to cure your problem. Your doctor cannot and will not do it over the phone or via e-mail since only face-to-face can he/she get all the information necessary to make a correct diagnosis of your particular condition.

Though not as important as your health, your home is still one of your most important assets and investments. Some new arrivals on the internet are sites that allow you to enter your address, and they will give you estimates of your home's value. Now my opinion on this subject. The problem is that, as with the health websites, some people put more reliance on these sites than they want or merit. One of the agents in my office here in Zephyrhills, Florida has a seller that checks her home's purported value on one of these sites at least once a day, and then reports the ups and downs that she sees. The sites I have seen so far have disclaimers (just as the medical site did) that say that their figures should be seen as general guides for areas and not exact figures. If their results could be all that exact it would make my life a lot easier. Instead of spending hours doing a market analysis for a customer, all I would have to do is enter the address and get the price. But doesn't common sense tell us that if it were possible to get a price this way, the multiple listing services all over the country would have come up with this service for real estate agents to use long, long ago. But no MLS that I know of does this. We have to make our money the old fashioned way, we earn it every time by personally doing a Comparative Market Analysis (CMA) for each of our customer's properties.

So I did my own little experiment. First, I conducted a Google search for some of the best known online home value estimators. I am not going to name them, but you can find them and others easily. For this post I will call them Company A, Company B, Company C, Company D, and Company E. I was going to use my own home for the subject property, but it is only a 2 bedroom/1 bath on an undersized lot. With just 700 square feet of living space, it is not typical. So I used a family member's 3 bedroom, 2 bedroom, on a large lot. This is more like the typical home a lot of you have and for this experiment it will do nicely.

Right off the bat, Company D and Company E could not find the property, no matter how many different ways I entered its address. Now this is not a new home. It has been there since 1980, and it is easily found in the county tax database. So for all practical purposes, these two companies were useless as estimators to me. If you cannot find the property you cannot evaluate it. Again, let me say that if you put this home's address on the county search engine or Google or Yahoo's map searches, you would easily find it. I do not know why these two sites cannot locate it. But not a good sign. So I scratched these two off my list.

Now I moved on to Company A. On this site I entered the address and it came up with the following information:

  • It gave a sales price estimate of $173,000.
  • It gave range of prices for this home of $145,370 to $183,380.
  • It said that in the past 30 days the value had dropped by $2,500.
  • It had the living space for the home at 1,500 sq ft and built date as 1980.
  • No mention of whether or not home is in a flood zone.
  • Gave no number of bedrooms, but did say it had 2 baths.

Company B gave me the following estimates:

  • It gave a sales price estimate of $164,000.
  • It gave a range of prices for this home of $147,639 to $188,649.
  • It said in the past 30 days the value had dropped $4,554.
  • It had the living space of the home at 1,500 sq ft and built date as 1980.
  • No mention of whether or not a home is in a flood zone.
  • Gave no number of bedrooms, but did say it had 2 baths.

Company C had this to say about the subject home:

  • It gave a sales price estimate of $193,000.
  • It offered no range of prices for the home. (Do they think they are so exact they do not need a range?)
  • Again, no mention of bedrooms, but they noted 2 baths and 1,500 sq ft of living space.
  • No mention of whether or not flood zone was present.

Now, right from the "get go" you can see a wide variance in what these estimates are telling you. Just the estimated price from the highest company to lowest is $30,000! That is a pretty wide margin. Get it wrong by using these to price your home and you could be seriously under-pricing or over-pricing your homes. This could hurt you economically. One of my colleagues told me that she had heard of a site where the price range estimate was over $150,000! Wow, err on the wrong end of the range there, and you could be either losing a bundle by selling too cheaply or sitting on a stale property for the next 10 years because you had priced to high for the local market.

Here is some of what can skew the results. First, as far as I know, these sites use county records for the data they utilize to make their estimates. However, county records are notorious for not being accurate all of the time. In the case of the subject home above the county records did not show and/or the online sites did not note the following:

  • The county shows that the home has a swimming pool. No site indicated this. However, the pool had been filled in, but the county said it was still there. So a double error for the county and the sites.
  • The county did not show that the garage had been converted into living space and is now a 300 square foot family room. This greatly adds to the living space of the home. Should be 1,800 sq ft, not 1,500!
  • In our county, and perhaps yours, the number of bedrooms is not shown. Even when square footage is similar, a 3 bedroom house has more value than a 2 bedroom residence. In this case the home has 3 bedrooms, but the county does not disclose this fact and so the estimators could not use it to get a more exact price.
  • There was no flood zone information noted. Our county (but not all) indicates whether or not a home is in a FEMA designate flood zone. This can truly affect the price and desireability of your home, and at the very least, will increase a buyer's costs since flood insurance will likely be a requirement of any lender. No estimator site seemed to notice this information.
  • County site did not note upgrade/change from old vinyl and wall-to-wall carpeting to ceramic tiles and engineered wood flooring throughout much of the home.
  • County sites seldom comment on the overall all condition of the home and this home was no exception. Built in the early 1980's it has flat ceilings, not the vaulted, volume, or cathedral ceilings that are popular now and add value to a home.

Common sense tells you that using the data that is there and kind of making guesses (how I do not know) about the missing data, will make pricing estimates less than realistic much of the time.

These sites are what they are. If accepted for that, they are fine at doing what they do. That is giving you a VERY general idea of what homes in your area may be selling for. They do not intend to give you an exact price for your own home. Based on its condition you may be below or above the average. Only a first hand inspection by an experienced REALTOR can get you close to that right price.

Think of it this way. A drill you buy at the Home Depot is great for making large holes to run wires or pipes through. The work does not need to be that exact so they do this work well. That was what their creators intended them to do. Now, if you were setting in a dentist's chair and he brought that same Black & Decker drill into the room to drill a hole in one of your teeth, you would be up and out of the door in a flash. Forget the laughing gas, that is just not going to work. Instead the dentist uses a more precise tool to do this more delicate work. The right tool for the right job!

Realtorlogo That is how a real live REALTOR differs from the online sites. He can do more precise work, and isn't that what you want when you are selling or buying your most important assets and investments? Of course, he too will review the information on the county sites and on the multiple listing sites. However, he will visit and tour your property to see what its positives and negatives are. This first hand exposure is the card your real estate professional has that trumps online services. Just like a visit to your doctor's office beats out a consult over the internet. Talking face-to-face with a real person is extremely critical when you are dealing with real estate matters.

Agents can check on the following things that will help them set a more accurate asking price on your property:

  1. They can confirm if the county and MLS information is indeed correct or adjustments need to be made.
  2. They can see if the comparable properties that they had found online are truly similar, or if there are differences that could place your home above or below them on the pricing scale.
  3. They can advise you as to what you can do to give your home an "edge" when you are marketing it. Declutter, depersonalize, clean carpets, etc.
  4. They can see if you have made changes to the home that make the county information no longer accurate. Like the case of the swimming pool at my subject home. Did you remodel the kitchen with high-end features and appliances? This can greatly affect the price you can ask, but not always. Your REALTOR can tell you. An online site will not.
  5. They can take into account information that does not appear in the MLS or on the county sites. Is your home or the one next door painted pumkin orange? Is there a large dog next door that constantly barks? Do train tracks run within 20 feet of your backdoor? Whether you like it or not, these all affect prices yet unless an agent is used they are not figured into the pricing formula.
  6. County sites do not usually indicate additional fees that homeowners have to pay, such as HOA fees, maintenance fees, Community Development District fees, etc. These can sometimes be quite hefty and could therefore affect the attractiveness of your property and the price you can ask. An agent can take this into account and weigh its importance in your particular case.
  7. Your agent can find out if your home appears to be in a flood zone based on county information and FEMA maps. Keep in mind that to be absolutely sure a survey is necessary.
  8. They also have experience working in the field on a daily basis. This kind of experience cannot be duplicated by any computer that I know about! It can be invaluable when pricing property.

What is discouraging for agents is to meet with sellers for the first time and have the owners tell them they went online and know what the price should be. Thesellers have in fact used that Black & Decker drill to fill a tooth. And let's face it, when you see a range, it is human nature to want your home at the top of it, even if it should truly be nearer bottom. Your agent is the impartial observer in this situation and wise sellers listen to him or her. And to be fair, I have seen buyers do the same thing. Only in their cases, they look at the bottom of the price range they see online and make that their offer. I had a couple fly in from out-of-state 3 weeks ago. They found a home they liked, but using a site they said the price should be $ XXX. I showed them the comparables that had recently sold and also let them tour the competition. The offer they made was $15,000 under the $69,000 asking price, and the sellers dropped the price drastically to $60,000 (below true value in my estimation)! However, firmly believing the online estimator the buyers said they had to think about it and never called back. In the end they wasted their time, 2 full days of my time (and gas), the sellers' time, the listing agent's time, paid for airfare for 2 people, and then killed a deal based on a faulty computer generated estimate.

So certainly visit the estimator sites to get a general impression of your market area. Check out several of them so you can confirm the information I gave you above. See how your home's value varies from site-to-site. Do be sure to read each page's own disclaimers and keep in mind the sites' limitations, which are often numerous. Many even advise you to seek the advise of an agent who can help you hone your estimates. Accept them for what they are, limitations included. However, do not check these sites day-after-day and worry yourself sick over market fluctuations that do not likely reflect what is really happening outside in your neighborhood. Do not let it become an obsession that drives you and your agent crazy. In the end, your personal local agent is a better judge of what your home is worth.

So work with a local real estate professional who can guide you as you make more precise decisions about pricing and offers. He or she can give you up-to-date information so that you can see what is happening locally and what you need to do to make your home stand out amongst the competition. In the end I believe you will have a much more gratifying experience.

For more information or to ask questions about this topic, you can call me at: 813-783-4444 or e-mail me at: jelwell1@tampabay.rr.com

I also invite you to vist my webpage at: www.jelwell.century21bnr.com You will find a lot of useful information and links there that will help buyers, sellers, or anyone interested in real estate.

John Elwell - REALTOR

CENTURY 21

Bill Nye Realty, Inc.

813-783-4444

Licensed in Florida

 

Comment balloon 1 commentJohn Elwell • July 05 2008 03:03PM

Comments

Great post, John! Please contribute to my "increase home value tips" post here http://www.activerain.com/blogsview/573093/7-Ways-to-Increase

Thanks,

Christina

Posted by Christina Cavins, www.BuySellOH.com Search Ohio Homes For Sale (Irongate Inc. REALTORS) over 12 years ago

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