The Downside of Online Home-Price Estimators
Don't bet the ranch on an online home-price estimator.
If you're thinking of selling or refinancing your home, or you're simply curious to see its latest market value, you can get an estimate in seconds. Just plug your address into an online home-value estimator, such as Zillow.com, Trulia.com, Eppraisal.com or the CoreLogic tool often found on bank Web sites.
All estimators collect data from public records, pull the facts for your home and recent comparable sales, and run the data through a computer model to produce an estimated value. But the results are only as good as the data input. I put four estimators to the test for my home and received wide-ranging results -- a difference of more than $200,000 between the highest and lowest estimate.
Each of the estimators started with out-of-date information because the public record of my home failed to reflect an additional bedroom and many square feet of living space that resulted from a major renovation we did with proper permits. (All the estimators except Eppraisal let you edit your home’s data and update the valuation.) Also, the estimators can’t assess the impact of good or poor condition, extra quality in design and construction, renovations that didn’t require permits, a purple exterior, or a dump next door, says Richard Borges, president of the Appraisal Institute.
Zillow and Trulia describe their estimates as a "starting point." Zillow also recommends that you supplement a Zestimate with a visit to a property, an appraisal, or a comparative market analysis from a real estate agent.
I followed that advice with the help of Chris Pritchard, an agent with McEnearney Associates, a McLean, Va., real estate agency. She observed that my home has many unique features that make a comparable analysis challenging. For example, we can’t add a paved driveway or a patio, deck or garage because of a local ground-coverage limit. She estimated my house’s market value close to Trulia's estimate. Zillows estimate was about $80,000 higher, Eppraisal’s was $52,000 lower, and CoreLogic's was $121,000 less.
Zillow.com and Trulia.com are most useful if you're buying or selling a home. You can see list prices of homes on the market or check recent sale prices (although they may be neither current nor comprehensive). The sites also list price history and property taxes, so you can see market values for your neighbors' homes and check out how much they paid for them and what they pay in property taxes.