You may have noticed the growing number of websites and home-valuing apps that have popped up in recent times offering free valuations. Typically, there are two types of valuations offered online: the automatic algorithm or the referral to a real estate agent (some offer both), and it’s very easy to be fooled by the result.
All major, and many smaller, real estate websites use an algorithm to initially price a property. You simply enter an address into the appropriate search tool and see a valuation within seconds. There are significant dangers involved with researching your property value this way.
The initial danger involves a variance in quoted prices. Here’s a typical example:
A property is valued at $835 000 by a registered valuer. A valuer completes three years of full-time study to qualify, and each of their valuations involves significant research and evaluation.
In contrast, within seconds of entering the same address into one of the major real estate websites’ search function, the site showed a valuation of between $690 000 and $870 000. That’s a 25 per cent range, and it’s hard to know which end to believe.
A more obscure website offered a valuation of $594 202 – a specific figure, right down to the dollar.
Comparing these online valuations, there was an amazing $275 798 difference between the highest and the lowest figures.
Despite the claims of accuracy, these computing algorithms treat property as a commodity. They use simple numbers: the number of bedrooms, bathrooms and living areas, house and land size, and so on, to provide an estimated value.
Algorithmic valuations overlook one of the most important factors when setting an estimated price: the emotional aspect. They usually ignore a property’s layout, location, views, school zone, whether it’s in a cul-de-sac or on a main road, and maybe that it’s on the higher side of the street. These important variables all affect the price a buyer will pay, and thus market value.
Pricing a property correctly is a combination of simple science mixed with complex art. Websites have the science but not the art.