You can get a ballpark figure these days on real estate values of just about any property in the country with just the click of a mouse -- but don't bet the farm on the dollar amounts.
A number of real estate Web sites now offer instant value estimates on existing properties that can be very helpful to homeowners seeking to refinance, as well as to potential homebuyers and sellers looking for the best investments.
Sifting through mountains of public records and using sophisticated algorithms that crunch variables such as square footage, number of bedrooms and comparable sales, these Web sites have the ability to generate accurate value estimates on some properties. In some cases, consumers have even found those values to be right in synch with full-blown appraisals.
But in today's real estate market, finding the true value of alternative investments propertiescan be difficult even for some professional appraisers. And when it comes down to an actual sale, industry experts say, only a licensed or certified appraiser can determine the true value of a home because the electronic figures can be off by large percentages and create unrealistic expectations for buyers and sellers.
Real estate Web sites may be tremendously helpful tools in estimating approximate values, but many in the industry feel they are not a replacement for traditional home appraisals. Public data can only tell so much about a property and cannot always factor in upgrades, additions or the general condition of the property. People should use the values found on these Web sites only as a "starting point" and never take them too seriously or use them in an actual transaction.
A full real estate appraisal usually is performed by a licensed and certified appraiser who visits the property and documents the attributes of the property, including square footage and the condition of the property and lot. T he appraiser will then value the property based on usually three comparable sales of similar properties. The appraiser factors in characteristics and elements that the home may or may not have in common with the comparables and then works up fair market real estate values based on those variables and recent comparable sales. Most importantly, a local appraiser knows the human buying and selling characteristics in the local market, something that databases and algorithms can't calculate.
Web sites can often have major inaccuracies because there is no human element. They rarely take into consideration the condition of the property, some counties often have unreliable and incorrect tax information. In 2013, a Wall Street Journal analysis of 1,000 recent home sales on Zillow found that the Web site's Zestimates are somewhat accurate with a little bit more than a 7 percent margin of error when determining real estate values. In a third of the transactions studied by the Journal, Zillow came within 5 percent of the actual price when determining real estate values. But in cases when Zillow is off, it can be way off: In 144 of the 1,000 transactions studied, the Zestimate was off by more than 25 percent.
These Web sites might give you a ballpark place to start the conversation about real estate values and how to invest money, but the values can be way off. That quick access to information has sometimes given people a false sense of hope because the valuation may not be based on what is really happening in the market.
Interested in learning more about real estate values? The Asset Quest team is here to help! Call us today at (239) 541-8448.