Online Home Value Estimates Are NOT Appraisals
Where are these home value estimates coming from?
By Karen Belita, Data Scientist
The prevalence of technology gives anyone more access to a broad spectrum of information on the internet. In real estate, access to property details and values is easier due partly to Automated Valuation Models or AVMs.
Automated Valuation Models spit out a price for a property based on computer algorithms and calculations that take different sets of property data and look for patterns and relationships between property value and the input data. There are websites that will have a home value estimate available by just searching an address, while others may provide an estimate only upon request.
When it comes to online home value estimates, the number one caveat for consumers is that these estimates are not a substitute for formal appraisals, comparative market analyses and the in-depth expertise of real estate professionals. However, it is important to know the different sources of AVMs and home value estimates available online, so that members can help clients and potential clients understand these estimates in their proper context.
The most popular sources of home value estimates online are those that use AVMs. These estimates have varying levels of accuracies and may not take into account the unique qualities of a home, a neighborhood, and local markets. The main sources of AVM estimates are:
• Realtors Property Resource® (RPR®): RPR® has two home value estimates, their AVM estimate and the Realtors Valuation Model® (RVM®) estimate. The difference between the two is that RVM® uses the same data as the AVM plus Multiple Listing Service (MLS) Data. Both AVM and RVM® show the accuracy level of the estimate by giving estimate ranges and confidence scores. This resource is available for REALTORS® only and allows a significant amount of expert customization, making it a useful tool for members, especially when working with well-researched clients.
• Realtor.com®: Realtor.com® uses tax assessment records, recent sale prices of comparable properties, and other factors to estimate home values. This estimate is free and publicly available.
• Redfin: Redfin is a web-based real estate brokerage that gives the Redfin estimate for the property, which is based on market, neighborhood, and home specific data, including MLS data on recently sold homes. Redfin cites that their estimates for properties currently on the market are more accurate than estimates for off-market properties. This estimate is free and publicly available.
• HouseCanary: HouseCanary has two main services: valuations and forecasting. Their estimates use property level data from public records and the MLS. Their accuracy will vary across markets depending on the availability of data. This estimate is available with subscription to their services.
• Homes.com: Homes.com’s estimate mainly uses public records. They test and benchmark the accuracy of their estimates. This estimate is free and publicly available.
• Zillow: Zillow has the Zestimate, which is their home value estimate for properties and is computed using public and user-submitted data. Their estimates have different accuracy levels depending on the data of the property and location. This estimate is free and publicly available.
• Eppraisal.com: Eppraisal.com uses property records, home sales data, and local market data for their estimates. Their accuracy depends on the accuracy and completeness of public data. This estimate is free and publicly available.
There are also websites that provide home value estimates by request only or estimates using user inputs: Trulia.com, HomeValues.com, ForSaleByOwner.com, GuaranteedSale.com, ValuemyHouse.com, and ZipRealty.com. Some banking and financial institutions, such as Chase Bank, Bank of America, and the Federal Housing Finance Agency, also provide estimates to accompany their other financial services. Again, it is important to know that these estimates have varying levels of accuracy. These sites may or may not use Automated Valuation Models, but can be another source of property and home value data that anyone can access.
As technologies advance and more data becomes available, the number of sites that provide home value estimates may grow. With the knowledge of where to find home value estimates online, it is important to note that these home value estimates are not interchangeable with formal appraisals, comparative market analyses, and they cannot be used as a basis for a loan. Most of these sites, if not all, reiterate the importance of consulting the expertise of real estate professionals to receive an in-depth and in-person analysis of the property and the local market.
Original Post Found Here: https://economistsoutlook.blogs.realtor.org/2017/06/29/online-home-value-estimates-are-not-appraisals/