Modern technology has made it much easier to keep up with your home's value – or at least a computer's best guess of your home's value.
The true value of a home is what a willing buyer will pay a willing seller, and no one knows that exact number before a sale happens. If the same house could simultaneously be sold by 100 different sellers to 100 different buyers, the price would not be the same because of the human factors involved, says Stan Humphries, chief analytics officer for Zillow, whose Zestimate was one of the pioneers of what is called automated valuation models.
To get a value using an AVM, you feed a lot of data into a computer, which crunches the numbers according to directions (or models) you give it and arrives at a home value estimate. Different companies use different data in different ways, which accounts for some of the variation in online home values. Obviously, the accuracy of the data itself affects the outcome. There are also factors a computer can't see, such as whether your kitchen has ugly wallpaper or dirty carpet.
"The thing about homes is they're not commodities, Every home is different" says Nela Richardson, chief economist for Redfin, which has an automated valuation tool called Redfin Estimate.
While the various online AVM services spit out a single number that is an estimate of the value of your home, Richardson and Humphries point out that the number comes with a few caveats. Zillow provides a range of values for an estimated sales price, as well as publishing the error rate for a given municipality. Redfin shows you the comps it used to reach its final number.
"There are some things that aren't explicitly in the data that our models aren't able to discern," Humphries says. "A lot of consumers don't focus on that value range, and they should. The wider that range is, the less certain we are. … From day one, we've said these are all opinions."
Exactly what data the services include and how they use it to create the estimate is proprietary, though all incorporate public records, completed sales and MLS listings. But one reason the companies arrive at different estimates is that they aren't all using the same facts.
Economists who work with the data remind consumers that the estimates are just that, estimates, and that the actual sales price is likely to depend upon many factors, including the condition of the home, the motivation of buyer and seller, and the supply and demand at the time the home is offered for sale.
"This is the starting point of a conversation that you're going to have with your family and your real estate agent," Richardson says. "It's not just this black box that gives you a number. It's important to note that this is not a be-all, end-all. It's just the beginning of a complicated process."
As the president of Better Homes and Garden Real Estate Tech Valley in Albany, New York, Miguel Berger has that conversation every day. He doesn't recall a time that a home sold for its exact automated valuation. Some sell for more and some for less.
"You have to take it with a grain of salt," he says of the computer valuations. "There are so many other factors that the computer doesn't understand." He notes that homeowners rarely look at the disclaimers, margin of error or other qualifying information. "It's not a black-and-white science," he says. "It's an art."
Here are six reasons the automated valuation of your home could be off:
The facts in the public record or the MLS are wrong.
Your home is not like others in your neighborhood.
Few homes in your neighborhood have sold in the last six months.
Your home has not been on the market in recent decades.
Public records in your jurisdiction omit key information.
The market is changing rapidly.
So, no matter how much data these calculators crunch, they can’t take into account the intangibles of your property: the condition of your space, the updates and upgrades you’ve made, or the features that are (or aren’t) popular in our local area.
This is where real estate agents come in. Agents are experts on the local market and know what buyers are willing to pay for a home like yours.