Home Value: What the Web Can and Can't Tell You
So-called "automated value tools" can tell you a lot about a property, including its sales history, estimated market value and what comparable homes have sold for. But to get the most from online home value sites, it helps to understand the limitations of home value estimators and calculators.
The first thing that's important to know, says Steve Crossland, a Texas real estate agent with 20 years' experience, is whether the home value estimator's information is "coming from real sales data or a guess."
"You can go online and get a general approximation," he says. "But to get a real price, you have to go inside a house."
If you're playing around with online home value tools, here are other things to be aware of, say real estate professionals who use them every day.
1. Automated home value tools are great for getting started
Where home value websites come in really handy is in the early stages of a search. Most offer general information about neighborhood income and home prices, which is especially useful if you are moving out of the area or to another state. "These sites are part of the initial search," says Tony Yollin, a Realtor in Venice, Calif. "It's helpful because it starts to help you think values."
Like most professionals we spoke to, Yollin cautions that there's no substitute for a hands-on examination of a property to get a feel for its true value. "The computer programs do it based on square feet and lot size and public record, but nothing else," he says. "You've got to be careful."
Automated home value tools rely on public records for their data, and some places have more available than others. Texas, for example, is a "non-disclosure" state. "None of our home sale prices are reported to the taxing authorities," explains Crossland. That means automated value sites can be more or less reliable, depending on the state and even the neighborhood where properties are located.
In places where home value data is limited, Realtors like Crossland rely on other methods. "We use MLS (multiple listing service) data, and do a market analysis, and try and narrow it down. We know the neighborhoods and have been in a lot of them, so we have a good feel for how things compare," he says.
3. Neighborhoods affect home value data
OK, so we can all agree that automated home value sites can't do certain things. They can't, for instance, assess the age and condition of individual building components -- or, for that matter, the condition of neighboring homes.
That's why valuations for "homogenous" neighborhoods, with a high proportion of very similar homes, tend to be more accurate, says Crossland. "The houses were built at the same time and in the same style, so they are going to be easier to peg. A neighborhood that has gone through a few neighborhood cycles -- growth, stability, decline and rejuvenation -- will be harder to peg."
The more mixed the homes are in age and condition, the more variable the results a home value site will spit back. "If houses are 50 to 100 years old, and you have a mix of properties from original condition and some with new lots, there's so much variation that a valuation tool is going to have a hard time giving a prediction of any home," Crossland says.
4. Automated home values are just part of the picture
Automated value websites are just one tool in the homebuyer's toolbox. "For finding value it's really great that these sites exist, but they're not exact," says Yollin. "You learn a lot by walking in the door, the orientation, the traffic zooming by."
And, of course, there's one thing a home value site will never tell you: the exact price someone is willing to pay for a home. "The true value comes the day someone says, 'I will pay this much for it,' " says Yollin. "Then you really have a value."
Want to learn more about home valuation? Here are some AOL Real Estate guides to help.
- Home Values: Top 20 U.S. Markets
- Video: Inside the Mind of an Appraiser
- Home Appraisals: Five New Truths
- How to Negotiate a Home Offer
More on AOL Real Estate:
Find out how to calculate mortgage payments.
Find homes for sale in your area.
Find foreclosures in your area.
Get property tax help from our experts.