Home valuation tools may or may not be accurate

Don’t expect total accuracy when using sites such as Zillow

The process of buying, selling, or shopping for a home seems to get just a bit easier every day, thanks to the Internet. It wasn’t all that long ago that home shoppers had little choice but to drive all over various neighborhoods looking at houses. Now, with thousands of online real estate sites, potential buyers can sit at home, search the Internet, and take a “virtual tour” of hundreds of houses without leaving their seat. Once they narrow down the choices, they can, if they wish, see the houses they like in person.

A fairly new addition to the arsenal of online tools is the creation of home valuation Websites. Perhaps the best-known of these is Zillow, but there are others, such as RealtyTrac, Domania, and HomeSmart. These sites, also known as auto valuation models, or AVMs, have become popular, not just with home shoppers, but also with curiosity seekers who want to see what their house, or that of their neighbor, is worth. But how accurate are they?

Not all that accurate, it turns out. MSN recently did a test using a number of properties that had recently sold. Before the selling data could propagate to the valuation sites, they checked to see what the sites “thought” the properties were worth. The results were all over the map; some missing the mark by as much as 40%. Results within 5% of the actual selling price were comparatively rare.

Does this mean the sites aren’t useful? Not at all. The products are fairly new; the algorithms they use to calculate value are constantly being updated. In time, perhaps fairly soon, they will be able to more accurately reflect current, and changing market conditions. As more and more databases of information, such as selling prices, Census records, crime statistics and such become more readily accessible to these online estimators, their results should become even more accurate.

In the meantime, the sites still have some usefulness. Here are a few things that you might use an AVM site for:

• Selling a home - While not entirely useful in order to decide how much you should ask for a home you are selling, a valuation Website might contribute some useful information for you.
• Buying a home - A site such as Zillow might offer some general information regarding home pricing in a particular area that interests you.
• Tax assessments - If you think you are being assessed too much in property taxes, information from an AVM might help you talk down your tax bill. Be aware that It may not work as well as a full property appraisal.

These sites, while useful, are still in their infancy. Therefore, you should take the information they offer with a grain of salt. Check with multiple sites and compare the information with that which you receive from other sources. The more varied your sources, the more accurate your information will be. And keep in mind that in some states, such as Utah, the information used by these sites is difficult to come by. In our own neighborhood, Zillow reports that property values on our 30 year old street are “not available.”