It really depends who you talk to. Real estate professionals and professional appraisers — big surprise here — maintain that online appraisal services don't provide accurate measures of a home’s value.
But others say different. A 2007 Wall Street Journal analysis of Zillow’s ubiquitous home “zestimates” (the company says it surveys 90 million U.S. homes) says that in most cases, Zillow is fairly reliable. But the online appraiser does make mistakes – The Journal says that Zillow is off by 25% or more on one out of every 10 home estimates.
For the record, The Journal’s study of 1,000 U.S. homes appraised by Zillow found that the average difference between the Zillow price and the actual price was 7.8% - not too far off from the 7.2% “margin of error” that Zillow recognizes.
Even Zillow has acknowledged that the online appraisals it presents to Web-surfing homeowners is only a starting point, and shouldn’t be used as any final barometer of a home’s true price.
Maybe that’s a good thing. A quick review of a Bucks County, Pa., residence shows a wide disparity — $30,000 — in price between Zillow and Trulia, with a price of $475,000 on Zillow and $505,000 (for a wider “neighborhood range” quote) according to Trulia.
So if you’re going to use an online appraisal service, only use them as an approximate gauge on a home’s value. In fact, your best move is to hire a professional home appraiser to get a more specific estimate (even Zillow advises that strategy).
If you insist on using online sites (they’re free, as opposed to the $250 or so you’ll pay to an actually physical home appraiser), use them in combination with your real estate agent’s best estimate of the value of your home. That said, $250 isn’t a lot to pay to insure that you’ve pegged the value of your home correctly.
When you arrive on a home value number, slice 2% off the sales price of your home. The primary reason why homes don’t sell is they’re overpriced. Better to improve the chances of selling your home by cutting a bit off the top to encourage more offers. If you’re lucky, a bidding war might even start.
Overall, online appraisal sites are certainly useful tools, giving you a dynamic, ever-changing snapshot of home prices on your block — even on your own home.
Just don’t bet the ranch on them.
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