Plenty of sellers have visited online home valuation sites such as Zillow, Trulia, eAppraisal, and others only to be shocked at the value of their homes.
Most sellers are pleased when the values appear higher than they expected, but many online valuations come in far lower. Estimating a home’s market value is far from an exact science. What these sites attempt to do is provide greater transparency to homebuyers and sellers by making data derived from public records, more…public. They publish what you paid for your home and how much you pay in taxes.
Many have satellite views so accurate they can spot your cat laying on the front porch. How do they do it? Home valuation sites contract with major title companies such as First American to obtain county tax roll data. All property is registered with the county for property taxing purposes.
They also find ways to become members of local multiple listing services, which are either subsidiaries of real estate associations or owned by local real estate brokers. That way, they have access to listing data. Between tax roll data and listing data, home valuation sites apply their own secret sauce, or algorithm to come up with “zestimates” or approximate values of what homes are worth.
Sometimes the results are spot on, but they can also be terribly inaccurate. First, transaction data has to be recorded with the county, which could take weeks. But, what alters the algorithm most is that properties not currently on the market are included in the data. The algorithms can’t possibly show whether or not a home has been updated, how well it’s maintained, or esoteric values such as curb appeal and views.
For that reason, online valuations should be used only as one of many tools to estimate a home’s value. Ask your real estate professional for a comparative market analysis, or CMA. He or she can show you the most recent listings and sold comparables, accurate to within hours or a few days at most.