How Bad Valuation Tools Are.
Many homeowners, regardless if they are planning to sell or not like to keep an eye on their property’s value. A simple way to do this is by using the “instant home valuation” calculators found on websites and property portals. What’s not to love about a free valuation tool? You can get the value of your home without inviting an agent to your home. But did you know they are usually wrong and can give wildly different values?
To illustrate how bad these valuation tools are: I selected three of our recently sold properties and got instant valuations from 11 different sights to see how the instant valuations compared to reality (Fig. 1). I haven’t named names on the table (I don’t want to get into trouble), but it doesn’t matter because they are all as bad as each other.
This experiment had mixed results, with a few valuations coming within 2k of the sale price, but the vast majority either overvalued or undervalued the property by more than 20K! Even when averaged after 11 searches, the price was off by about 10%.
As you can see in Fig. 1, there is no one site better than the others: for example, #8 got the LA2 property evaluation correct but was off by 73K on the LA1 property and 42K on the LA3 property. It also looks like some of these sites are using the same algorithm: #5 and #9 are identical across the board, whilst #3 and #4 are very similar.
So, what should homeowners do?
Firstly, don’t get too excited about a higher-than-expected estimate because it’s probably wrong. Homeowners must realize that the most important number when considering the “value” is the amount someone will pay to buy the property, not the price estimate. Buyers will pay what they think the property is worth, period.
Second, do some of your own research. Have a look at the portals and see what other properties near you have sold for recently. By scrolling through a few pages, you will have a better idea of the market than the valuation calculator. It’s also more fun!
Third, if you are thinking about selling your home soon, having an accurate price estimate is very important. If your price estimate is under the market value, it will hurt your chances of selling at the right price. But an overvalued price estimate will make potential buyers worry that something is wrong with your property.
So, if you disagree with your price estimate, please contact a member of the team at CoastNCountry Estate Agents in Lancaster! We’d be happy to provide you with an accurate valuation should you decide to sell, or even if you just need a hand repairing your automated valuation.
Hope this helps. If you have any questions about the valuations or price estimates, please get in touch with kellie at coastncountry.co.uk! Thanks.