How Accurate Are Online Home Value Estimates?
If you own a home you probably have looked at some type of online home value estimate. Even I like to look at mine as a curiosity to see how far off they are from reality.
I’m the type of person who orders the exact same meal every time from restaurants so I own 2 of the EXACT same houses right around the corner from each other.
Here are the online home estimates I received on the same day for the 2 homes. These homes are exactly the same with a $36,000 difference is estimated value. How can this happen? I have no idea. The homes are the same size, same finishes, same builder, same floor plan, same schools with the same neighborhood amenities.
I can’t explain the $36,000 difference with these homes. In general, we don’t see online home estimates being particularly accurate due to so many differences between homes.
The artificial intelligence isn’t sophisticated enough to accurately reflect the differences and make adjustments between homes. One example would be 2 homes located across the street. One home might back to a greenbelt and the home across the street might back to a busy street. Another example would be one home that has been updated compared to a home with the original builder grade finishes. The algorithms don’t have access to that level of detail when calculating the value.
In addition, home sale information in Texas is not part of the public record. The websites that calculate home values don’t have accurate home sale information from previous comparable sales. Many simply go off the tax records. The tax record for my personal home is considerably less than the market value.
The most alarming thing about these 2 estimates is how far off they are from true market value. It’s not just that they are off by $36,000 from each other. The scariest thing is I could sell either of these home for at least $500,000!
What that means is if you used an online home value estimate to price your home you will underprice your home. According to the Austin Board of Realtors the median prices were up 19% in January 2021 compared to January 2020. In many areas we work prices are up 20-25%.
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