Home Valuation Sites: How Accurate are They?

by Andy Hough on November 20, 2011

The following is a guest post on behalf of Money Supermarket.

Buying and selling real estate is something that most people will at one point or another encounter in their life. Mortgages are high on the list of priorities for homebuyers and the number of people that compare mortgages at moneysupermarket and the other comparison websites is constantly on the rise.

For most of real estate history, the valuation of a home depended a great deal on the value that an official real estate appraiser put on the property.

The appraiser uses data such as the recent sale prices of homes in the area and added features that may set the home apart from others in the neighborhood.

If all homes in the area are identical, but the home being appraised has a swimming pool, the appraiser would use that feature to add extra value to the home.

The value of a home can be considered highly subjective and often depends on the experience and preferences of the appraiser.

While not many appraisers deliberately skew the results of an appraisal, it is still considered more of an art than a science. Appraisers need years of experience in the real estate market to come up with accurate estimates.

It is possible for novice estimators to be off in their estimate by several thousand dollars if they are not familiar with the appraisal process. Nevertheless, this method of appraising real estate has been proven and tested for many years.

It was not possible for homebuyers to independently check the value of homes in the area unless they kept an eye on real estate listings to see what homes were selling for. There are now a number of websites on the internet that offer real estate appraisal services.

They use data such as the sale price of homes in the area and tax assessments. Now that almost everyone has an internet connection it is possible to check the prices of homes anywhere in the country.

The only problem is that this data does not always give an accurate estimate of a home’s value. Indeed, the valuation can fluctuate dramatically in the space of several months.

There have been homes that have gone from values of over $1 million to under $400,000 within a few months. Sometimes, this is due to data errors and is corrected as soon as it is spotted.

At other times the valuation is not accurate because a home may be located in an eclectic neighborhood that has both higher and lower priced homes within a short distance.

Historical homes that are worth over $1 million, but are located next to homes worth $200,000, will not be appraised correctly using one of the appraisal websites. Many buyers who browse the sites to look through prices do not realize that many of the websites are more or less guessing the value of homes.

They use an algorithm set to certain computations to come up with the value. A certain number of bedrooms and bathrooms receive a value that depends on the sale price of other homes of the same size in the area.

Real estate agents can manipulate the data they enter into the system when selling homes to make them seem more valuable than they are. While these websites can offer a valuable insight into the price trends of a neighborhood, it is certainly buyer-beware when it comes to trusting the appraisal’s accuracy.

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