A big question being asked these days is “Are online home valuations the same as an appraisal?” I like to call these services “Guestimates” because that’s exactly what they are, a best guess estimate.
Understanding how appraisals are derived is super important when it comes to selling your home. The wrong dollar figure can cost you either way you look at it. If your property is priced to high, then nobody will be interested or you could receive ridicules low offers and may never get your home sold. On the other hand, if your home is priced to low then you lose money and usually don’t find out about the disappointment until it’s too late.
Online home valuations should really be used as a “home valuation resource”. A place to get additional information about your property and the surrounding area(s). None of these sites are suitable replacements for an actual human appraiser—and these websites will hopefully be the first ones to tell you so.
Because so much more is tied up in the appraised price of a home than real estate transactions, these tools are only good for first speculations on the part of the home seller or buyer. There are aspects of the properties that these websites just don’t have the specificity to address. Think interior updates, building add-ons, neighborhood changes, or even neighboring properties. Also, the values these websites may offer for a single property could vary wildly. For homes valued at $1 million or less, the difference between the highest and lowest evaluations can be up to $250,000, quite possibly more.
It’s important to understand, all online valuation resources—use publicly accessible data to initiate their guesses. Each site runs that data through its own computer model to arrive at their suggested prices. Each site’s formulae for producing their estimates are different, which accounts for the wide range of potential results. Also, the availability of public data, or the lack thereof, can be a major factor in the precision of their estimates.
Most of the major players in online real estate have some kind of evaluation mechanism: Zillow.com, Redfin.com, Trulia.com and Realtor.com. Appraisal-specific sites include eppraisal.com, which also incorporates the Zillow “Zestimate.”
Chase Bank and Bank of America also offer estimated home values online. BofA offers a moderately long list of comparable homes in the area, as well as graphs on sales data related to the kind of property being looked up. Even just between these two institutions, the ranges of values they provide can be wildly dissimilar. In looking up their estimates for one specific address, Chase’s bottom end of the range was almost $19,000 lower than BofA’s lowest. The difference between the two banks’ highest estimates was more than $43,000.
If you’re willing to release some of your private information, Housevalues.com and HomeLight.com purport to offer value estimates. RealQuest, a paid site, offers a comprehensive amount of information on property ownership and sales through its search engine that can be exported for the purpose of armchair appraisals.
But again, it must be stressed that valuations that come from these sites is speculative at best and the last thing you want to do is speculate the sale price of your home. You can learn more about the appraisal process by reading my entire article: How real estate appraisals provide sellers with accurate property values