Online Home Guess-timates | 3 Things To Know About Pricing Your Home

The convenience of having online information at your fingertips is truly a bittersweet phenomenon; you can literally find an answer to everything you ‘need’ to know online…but how do you know that those answers are accurate? Even with the best intentions, web-based resources can mislead hopeful knowledge-seekers; we see this happen every day when it comes to homeowners utilizing online home valuation tools.

There is nothing more exciting than popping your address into a well-known real estate marketplace and getting a value on the spot. But there is also nothing more discouraging than planning your entire financial future on a falsehood. In this week’s blog, we wanted to address the three things that you need to know about online guess-timates.

1. Remember ‘GIGO’. Remember the old acronym ‘garbage in, garbage out’ (GIGO)? Guess what – it applies to real estate too. Automated valuation models (AVM’s) all calculate your home’s price by crunching available data and inserting into an algorithm. Each AVM pulls information from different sources, and calculates those numbers differently. You can literally input your address into 5 different sites and get 5 different values, depending on what data the site is using and how. Zillow even discloses a median error rate of over 8%, ranging from 5.3% to over 11% in some states. On a median Silicon Valley home price, that can be an over $80,000 inaccuracy.

In addition, the information being evaluated is typically derived from public records and the MLS, which may omit key information depending on the municipality, as different states permit different public accessibility of home data.  There is also the matter of inconsistent calculations of square footage (such as the omission of space such as a garage or finished basement). Other things the algorithm cannot account for are the age of the comparables (what if your neighborhood hasn’t had a home sale in 6 months), the current or upcoming development in your area (are you near the next Apple campus?) or the actual climate of the market in your location (consider desirable micro-markets like Almaden & Cambrian).

2. Consider who’s behind the curtain. Look, we know that Bay Area real estate isn’t the Land of Oz…but it’s still important to consider the source and intent of who or what is evaluating your home. Online home valuation tools are not designed for homeowners; they are designed to collect your data to sell to real estate agents. Many professionals invest a great deal of marketing dollars to receive your data, and they are the primary client of the site – not the homeowner. Thus, giving you an accurate home value is a secondary goal, not the primary function or purpose of the resource.

That being said, we are firm believers that buying or selling your home is a personal decision that requires a human touch. We want you to be just as excited about the homeownership process as all of those online marketplaces, but for different reasons. We didn’t enter this business to sell your data, but to watch you achieve the lifestyle you deserve and the home you’ve worked so hard for. And we are pretty open about the fact that we hope to provide such a great experience, that you might even consider recommending us to a friend or family member. You might say our ‘curtain’ is so transparent that it doesn’t exist.

3. Your home’s unique identity. Does your home have a newly remodeled kitchen? Complete front & backyard drought resistant landscaping? A new roof, dual-paned, energy efficient windows or an upgraded HVAC system? Are you 10 minutes from a growing high tech campus? Keep in mind that only some online valuation tools allow you to enter key features, and even when captured, may calculate the return on investment of your upgrades differently than what the current market bears.

In addition, the desirability of your home may not only be influenced by internal condition and location, but by local inventory, supply and demand. While artificial intelligence is an up and coming field…chances are that your AVM tool has not completed Economics 101 or obtained a Department of Real Estate license, nor sold a home like yours in your community lately.

If you still aren’t convinced that online pricing tools may not provide the accuracy you deserve, consider the recent experience of Zillow CEO as reported by Curbed. His own home sold for $650,000 less than its online Zestimate, and he overpaid for his new home by more than a million dollars by his own company’s price estimator. Ouch!

If we can help you accurately assess the value of your home, please feel free to give us a call. The Homes of Silcom Valley team is thoroughly committed to using our daily (even hourly!) market experience, series of summer successes and decades of dynamic market movement to help you create your home and lifestyle exactly where you need to be. If that means we can help buying or selling a home, that’s great…but if not, we are still proud of a job well-done and client who has been truly served in the most important decision of their life.

Gratitude always,

Mark & Jason

team@homesofsv.com

Resources Used:

Don’t Rely Too Much on That Online Home Value Estimate: https://www.nerdwallet.com/blog/mortgages/online-home-estimates-accuracy/

Why Home Value Estimate Tools Aren’t as Accurate as You Think: http://realestate.usnews.com/real-estate/articles/why-home-value-estimate-tools-arent-as-accurate-as-you-think/

7 online tools to estimate home value, and why your estimate may be wrong: http://livingonthecheap.com/7-online-tools-to-estimate-home-value/

Zillow CEO Overpaid for His Los Angeles Home, According to Zillow: http://la.curbed.com/2016/7/11/12157338/zillow-ceo-brentwood-home-zestimate-overpaid