Not a home open goes by where I don’t get cornered by a home buyer with an iPhone (or Galaxy) showing me the internet based valuation for the home we are selling. More and more often when I sit in people’s homes, the family I am representing have done their own research on the internet as to what the home is worth.
So, this begs the question – how accurate are these auto generated internet valuations. Well the answer across the industry if you ask most agents is – not particularly! Now I don’t say this in order to justify my livelihood – but because it’s true.
For example, in the Nedlands area, a 4 bedroom home on 1012sqm can cost you 1.4m or it can cost you 4M. This will depend on age, quality, the street etc etc. The algorithm will give you the average for that type of home, ignoring the rest.
As an agent I have access to all the fabulous real estate systems and info available and some that’s not, and the bottom line is that it is a very rare occasion that these systems accurately reflect the real market value of a home. In fact, the systems we use to analyse homes usually generate a figure for me which I promptly delete. And the reasons are:
- It’s a computer algorithm that has between 10-20% margin
- Don’t take into account special features, such as views
- Don’t take into account sales that haven’t settled
There are countless websites in Australia that offer online property value estimates, but we are not computers and emotion, impulse and other complex human factors play a huge part in property purchases.
SO WHAT ARE THE PROS AND CONS OF ONLINE PROPERTY VALUATIONS?
A recent article looked at the accuracy of the five market leaders in online property valuation. It found that they were fairly accurate, most of the time. They found that on average estimated values with a margin of error under 10 per cent.
Accuracy decreased as property values increased. For properties in more expensive addresses, estimates were out by as much as 20 per cent. So what does this tell us? This tells us that the complex algorithms that property valuation sites use, don’t take into account the way humans think and feel.
When buyers see an attractive property, in an enviable address, with that special x-factor, they may pay more than what the numbers and trends say they should. Emotion, impulse and other complex human factors play a huge part in property purchases after all, and they’re things that no algorithm can currently account for.
AS A SELLER – HOW DO YOU WORK OUT HOW MUCH YOUR HOME IS WORTH?
When selling your property, you should use every tool that’s available to you, including online property valuations. They can be incredibly useful in the early stages of the process in order to get an idea of how much you can expect, but it’s important to be aware of their limitations.
That’s why if you’re selling property, you need help from an experienced real estate agent in your area – to draw upon their knowledge of the market and similar properties in order to come to an accurate valuation.
These real estate agents are able to draw on the same data that online platforms do, such as recent sales in the area, and past sale prices. They’re also able to understand the human element, and how buyers are likely to respond to your property.
I often recommend to clients that the most accurate way to gauge value is to employ a professional valuer and pay for a sworn valuation. Nothing beats a real living flesh and blood human being walking through your home. Someone who I able to actually ‘see’ the home and make a genuine assessment of it in light of the market and recent sales. A computer cant do this.
AS A BUYER – HOW DO YOU DECIDE HOW MUCH TO OFFER?
Online valuations can also be useful for buyers. They’re a cheap and easy way of roughly estimating a property’s value, and discerning what an acceptable offer might be. Because they are so easily accessible and free to use, they’re ideal at the stage where buyers might be considering several properties.
However, again they shouldn’t be relied on alone otherwise you will more than likely miss out to a more educated buyer. Speak to the agent who’s selling the property and ask for a price indication (keep in mind they mightn’t be able to provide one if it’s a deadline or auction sale). You should listen to their reasoning when they explain the property’s value.
I have met so many buyers over the last year or so that have kept missing out on homes to other buyers because they couldn’t get past the online valuation. So remember, they are a guide but not gospel. Just because a computer generated it and you paid $10 for it, doesn’t make it fact. Check the fine print.
So, next time, when you have your heart set on a property and you’re sure it’s the right one, it’s a good idea to buy a valuation from a registered valuer. This is the most accurate estimate of a property’s value available, and will most likely be required by your lender anyway.
EXPERT ADVICE FROM REAL PEOPLE
In the age of the internet, we want our information quick, convenient and cheap. That’s why online property valuations are great, however, property purchases and sales can be long and complex processes, and you may require expert assistance from a real human being.
To make sure you get your purchase or sale right the first time, speak to professionals who understand the ins and outs of the market – but also the people who buy and sell property. Get in touch with a local real estate agent or a valuer today.