Many home sellers these days visit online home valuation sites like Zillow and Trulia to find out the value of their properties. They are pleased when such values appear higher than what they expected. But a lot of instances, they are shocked when the value of their homes come in far lower.
You may wonder how these sites come up with valuations. For property taxing purposes, all property is registered with the city and county as well. What these home valuation sites do is they contract major title companies like the First American in order to have access to county tax roll data. And to obtain current listing data and recent solds, they try to become affiliated with local multiple listing services, which can be subsidiaries of real estate associations or owned by local real estate brokers.
Out of these tax roll data and listing data, home valuation sites then come up with their own algorithm to estimate the values of what homes in a given area are worth. While the results are precise sometimes, it can also be inaccurate. There are a number of things that alters the results given by the algorithm.
First, let us take a look at the transaction data. It has to be recorded with the county and it could take weeks. But the algorithm includes those properties that are not currently on the market. Such properties don’t contribute to recent market values as they have not been tested by the current marketplace.
Another factor is that algorithms may also include whether or not a home has been updated. If you think of it, these are subjective information that’s hard to quantify. These are things such as how well the house is being maintained, its curb appeal, interior design, window and yard views, as well as the neighbourhood popularity. With these reasons, you may regard online valuations as just a tool to estimate a particular home's value.
Still, one of the best ways to choose a listing price is to ask a real estate professional for a comparative market analysis (CMA). The recent listing asking prices and sold comparables he/she provides in your neighbourhood are likely to be accurate.
Therefore, if for instance, your home has been estimated for far less value on a certain home valuation site compared to what your real estate professional had shown, you may argue with such pricing to your potential buyers.
In the same case, if your home has been valuated higher at a certain home valuation site, you can’t also expect that that’s the real value. Again, recent comparables provide you a more accurate data regarding the current market.