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The 1 Flaw That Stops Online Home Valuation Tools From Working

I'm a big believer that online home valuation tools will one day be accurate enough to provide a better valuation than the majority of real estate agents are capable of providing.

But today is not that day, because there remains one big flaw that is holding them back.

The Fundamental Flaw Of Online Valuation Tools

Online Valuation Tools Have This Fatal FlawThe best way to demonstrate the problem with online valuation tools is through a parallel example.

Have you ever wanted to know what your car was worth? There are online automobile valuation sites that have been around far longer than ones created to value homes.

Take Kelley Blue Book as an example.

The tool works by asking questions and providing a drop-down for the user to select a best answer.

The questions start real easy, and everybody has honorable intentions.

Here's how the typical consumer utilizes the valuation tool

Make - OK, no problem, my car is a Toyota.

Model - This is easy, it's a Camry.

Year - Got it right here, 2012

Condition - Hmmm. Choices are excellent, very good, good, fair, poor. ... Mine is Excellent!

Would you care to guess what percent of people choose very good or excellent? I've heard it's 93%.

I guess if the car is not running, it's in "very good" condition, but if it runs, it's in "excellent condition."

Would it surprise you to know that the majority of homeowners are car owners too?

And unlike cars, the guts of the house vary. No two homes are exactly alike. We don't have neighborhoods in Tallahassee where the houses are LT, LTZ and LS. Each one is unique.

How would an online valuation tool compare my house to my neighbors? Simple. It assumes the only difference is square footage, otherwise they are the same.

So the fundamental flaw of online valuation tools is that they ignore two critical components of value ... condition and amenities.

Why Online Valuation Tools Exist

Online valuation tools exist in real estate for the same reason as they do in the automotive industry. They serve to gather your name and number for the purpose of selling your contact information to a small army of hungry sales people. For cars, your valuation request will be sold to a car dealership. With home valuation tools, the contact information is sold to real estate agents.

So, the valuation tool will give you numbers, but not the ones you need when it comes time to make a decision. Why not reach out to a real estate company directly, one that you trust?

If you'd like to know the value of your home, just fill out the brief form below and here's what we will do:

  1. We'll use your input to come up with a pretty solid range of values.
  2. We'll discuss with you issues that might impact the value of your home
  3. We'll ask you if you'd like a more comprehensive site visit.
  4. We will not give your contact information to anybody else.
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Whether you are planning a move or just considering one, determining the value of your home and the equity that you will be left with are a great start of the process. Have a question not covered in this post? Try clicking the online chat below, if we're here, we'll answer your questions in very short order!

Discussion

#1 By Estate Photography at 7/11/2017 3:49 AM

I think that it's best to just listen to your Realtor.

#2 By Ryan O'Donnell at 7/11/2017 3:49 AM

One could argue that the fundamental flaw in nationally-based, online home valuation tools is bad data; but not just the user-supplied variety.



Bad data #1: Zillow allows user-reported data (with little discernible error-checking) to adjust projected values in real time.



Bad data #2: Zillow scrapes (which is a nice word for purchases) property appraiser data, nation-wide. There is a LOT (note the all caps here) of disparity with regard to data standards, error checking, commitment to accuracy on the part of each county.



Bad data #3: Published, by-market standard deviations for valuations at Zillow are routinely in the 8-12% range. That is a laughably awful number (even when most of the data comes from government databases). Only the emerging nature (but, not really...its like a decade old at this point) of this technology keeps sane people from completely dismissing the Zestimates. Note: adding an additional letter, a fact does not make.



In conclusion, until the old guard, market-based valuation tools (aka realtors) work out some un-holy (or holy) alliance with Zillow to share data...the war of inaccuracy will persist. This is not to imply that realtors are the bad guys (and gals) here-both are just vying for market share.

#3 By Joe Manausa at 7/11/2017 3:49 AM

Thanks Ryan. I'll be curious if they can ever start really gathering data on amenities and home features ... not any time soon. As far as bad data (8-12% off) ... that seems to be the standard deviation for real estate agents opinions too :).

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