What is your investment property worth? In recent years, a proliferation of online resources has emerged to provide you with an answer before you ever consult a human. But while consumers have access to more information than they could have dreamed of a decade ago, that doesn’t mean you can expect a computer to deliver the final word on your home’s value – though it can give you some helpful hints.
“I don’t believe there are any accurate instant numbers,” says David Eraker, CEO and co-founder of Surefield, a new brokerage in Seattle that has a free Pricepoint tool that provides estimates of home values, so far just in Washington state. “I think the first thing you should do is take it with a grain of salt. You could probably talk to three or four different real estate agents, and they would probably give you different numbers as well.”
The variation in the data is a good reminder that any estimate of home value, whether provided by a human or a computer, is just that – an estimate. Computers and humans may disagree, for example, about which recently sold homes are truly comparable. Plus, when it comes time to do the deal, the negotiation skills of buyers and sellers (or their agents) may come into play.
“Opinions of value, there are a lot of them,” says Stan Humphries, chief analytics officer for Zillow, which pioneered the practice of estimating and publishing home values in 2006. “If you were to sell the same house 100 different times with different buyers and sellers, it would close at a different price.”
That means if you are looking at estimates for your home’s value, you have to consider what kind of data went into that estimate. If your home is unique compared to others in the neighborhood, for example, the choice of “comps,” or comparable homes, would be a challenge to find. Your estimate may also be less accurate than if you live in a neighborhood where all the homes are similar. If there have been lots of recent home sales in your area, there is going to be more data to work with than if there are fewer sales, and therefore you’ll get a more accurate estimate.
“The more the house is an outlier, the more difficult it is for anyone to price it, whether it’s a human or a computer,” says Glenn Kelman, CEO of Redfin, which just launched its own automated estimate tool. “The hardest things we had to deal with was which homes are comparable and which aren’t.”
All the online tools take advantage of publicly available data, which they then run through computer models to derive estimates of value. Exactly which data is used is proprietary, as are the formulas used to crunch it, but among the data sources are public records and the multiple listing services used by real estate agents. Exactly what data is available also affects the accuracy of the estimate, and that amount of data varies by municipality and sometimes by home.
Zillow allows consumers who register for a free account to correct or add data about their homes, and just this week the company launched a new Price This Home tool, which lets consumers receive a private estimate in which they control which comps are used. Surefield also has tools that allow homeowners and homebuyers to refine estimates based on their knowledge of the neighborhood and the listed comps. Redfin shows the comps and public records data about the home that was used, and you can email if you believe the information is inaccurate.
Zillow covers about 100 million homes in 450 markets. Humphries says the national margin of error for home values is 7.9 percent, but the rate varies by location. That’s partly because the type and accuracy of data varies, but also because home values are easier to estimate in an area with more sales and in areas with a larger volume of homes. “You’re dealing with less data than you’d like to have,” Humphries says of some areas. Parts of New York state, for example, don’t list square footage in public records.
He points out that real estate agents doing comparative market analysis have an error rate of 5.5 to 6 percent, and it’s rare that a home sells for the exact asking price. “No one’s error rate is zero. They’re all opinions of value,” Humphries says.
Glenn says Redfin’s estimates have a median error rate of 1.96 percent for homes on the market and 6.23 percent for homes not on the market, but the service so far covers only about 40 million homes in 35 major metro areas, which are often easier to value than homes in less dense areas.
The representatives of all the companies stress that their numbers are merely estimates, based on the available data, plus a number of assumptions about comparable sales. While all the services throw out a number for the home’s estimated value, most provide a range of values, which sometimes gets overlooked by consumers who focus on the number in big type.
“We think of our estimate as the beginning of a conversation, not the end,” Kelman says. “Many times the asking price of a home is the result of a fairly tense conversation between the owner of the home and the agent who is trying to sell it.”
Here are seven online tools you can use to help you estimate the value of your home:
Zillow: This is the pioneer of the home value estimating tool, and the company continues to refine how it arrives at its Zestimates.
Redfin: This new tool shows you photos and listing information for the exact comps used to arrive at the value of your home.
ForSaleByOwner.com : This site’s Pricing Scout tool gives you the average of a regression analysis and a comparative market analysis to estimate the worth of your home. It also shows recent sales of comparable properties on a map. You have to register to use it.
Chase: This tool allows you to change the information about the house to arrive at a more precise estimate, plus provides information on recently sold homes and neighborhood trends. You can also use it to estimate the value of improvements you’re considering.
Bank of America: This tool shows comparable neighboring sales on a map. It provides only a range of values, not a single number.
Surefield: This site lets you narrow or widen the range of comparable homes, plus exclude specific comps from the list.
eppraisal.com: This site uses data from public records and lists homes sold recently nearby.