2/1/2021By Realopoly staff
House illustration by sahiltrikha786/Pixabay

Illustration: Pixabay/Sahil Trikha

Ever wondered how much your house is worth, and looked for an automatic home estimate online? Most homeowners have probably done it at some point. It’s quite easy to find various home value estimates, published on real estate portals, but can you rely on them?

Here are the top 5 reasons why computer-generated home estimates (also known as Automated Valuation Models, or AVM) can miss the mark:

1. Inaccurate underlying data

The online home value estimates rely on statistical data from numerous sources, including: public records, county property tax records, and past MLS listing data. The information containing a particular house, including its age and size, lot size, and property tax bill, is mashed with data sets from various other properties in that area. The average value per square foot is then calculated, using a computer algorithm, and applied to arrive at the estimated value for the particular property. Often times, various data sources can have different information for a given property, which can make the data set not reliable. No wonder, then, that various online home estimate values can differ from one another.

2. No adjustments for renovations and improvements

Automated estimates do not account for renovations and home improvements done to the house, since they are not based on a physical assessment of the condition of the house. That in turn can make the estimate much lower than the actual value of a given property.

3. Limited location consideration

The computer-generated estimates often can’t distinguish properly when it comes to the unique attributes of the location of properties. Two houses on the same street, while similar in size and specs, can vary greatly in value. One house could be located on the lake side, and the other could be backing to a busy road.

4. No professional input

Real estate agents, and brokers, have the first-hand knowledge and experience in their local market, and can accurately assess the property value, through a process called Comparative Market Analysis (or CMA). They actually use a methodology similar to that of a real estate appraiser, in comparing the subject property to others similar properties that have either sold recently, are actively marketed for sale, or are in the process of being sold (under contract). They can even inquire with their colleagues on those under contract properties, to gauge the market potential of a similar property. That’s just something no computer-generated estimate can do, or apply to its calculation. The agents can also account for variances in the number of bedrooms, bathrooms, lot features, or additional features (garage, pool, specific location), as well as unique features of condos and co-op apartments (having a balcony/outdoor space, building amenities, high floor versus low floor setting, etc.). Finally, most property values are further influenced by supply and demand, economic environment, demographic trends, and seasonality (especially for recreation properties). The platforms offering automated estimates usually don’t use, or gather, that many details for their estimates.

5. Creating market confusion

The computer-generated estimates often set the wrong expectations for the real estate sellers and buyers. When the automated estimates are giving a higher valuation, than the actual property value, it can lead the home sellers to insist on listing their property for an unrealistic asking price. That in turn causes their home to stay on the market longer, attract less buyers, attain less offers, and possibly result in multiple rounds of price reductions (which often makes the buyers wonder what is wrong with such property). On the other hand, the home buyers who rely on those kinds of automated estimates don’t want to overpay for the property they are seeking to purchase. That could even come into play when the automated estimate is quite low. In such case, the seller, and their agent, can have an uphill battle trying to convince the potential buyers that the house is worth more than the online estimate. Ultimately, the automated estimates can become a source of confusion in the real estate market.

When it comes to home valuation estimates, the human intelligence still beats an artificial intelligence. An accurate property value estimate, from an experienced real estate professional, is much better than relying on some automated guesstimate.

Realopoly (www.realopoly.com), a new real estate marketing platform, offers a unique solution: an interactive home valuation tool, which allows homeowners to compare their own estimate, with one prepared by a real estate professional. Using a simple slider, homeowners set the dollar amount of what they think their property is worth and send it for a professional opinion, to a local real estate agent. Most agents offer to prepare the CMA for free, so it makes a perfect sense to consult a professional, on the real value of your home.



Christopher Burdzy is a licensed real estate broker, at Leader Properties Inc., working in real estate since 2004, in the NYC Metro area. He’s also the founder of Realopoly, the new cross-marketing platform for real estate, where agents can market each other’s listings, to sell the properties more efficiently, and provide better market exposure for their clients and themselves.