Getting an estimate of your property’s worth can be done within seconds these days by jumping online and using one of the many property valuation tools available. Even realestate.com.au has jumped on the instant property valuation bandwagon. But just how accurate are they?
We conducted our own experiment this week by comparing three different online valuations on the same property. We used CoreLogic, ANZ and Westpac and found variations of up to $150,000! Our experiment is validated by others who have done comparisons. In one comparison, a difference of more than $1 million was found.
Why are they so unreliable?
Each estimation provider uses their own methodology to work out the value based on data collected when the house was previously sold or rented.
We decided to take our investigation a step further by reading the waivers on each site. And it was here that the truth was revealed. For instance, below (in italics) is an excerpt of the waiver from CoreLogic:
CoreLogic’s online valuations (as is the case for all online valuation tools) rely on data from an algorithm “without the physical inspection of the subject property, without taking into account any market conditions (including building, planning or economic) and/or without identifying observable features or risks (including adverse environmental issues, state of repair, improvements, renovations, aesthetics, views or aspect) which may together or separately, affect the value.”
What they don’t tell you
Online valuation tools are built on statistical models. A statistical model will never physically inspect a property. So it doesn’t know if the property has been recently renovated, refurbished, landscaped or styled etc. (as confirmed in the waiver above).
Nothing will ever be as accurate as a physical walkthrough of the property. This is important to know for both buyers and sellers. Online tools might be good as a general guide, but you can see from the examples here that they can be enormously inaccurate and therefore misleading.
This misinformation can result in disappointment for sellers who could be misled into thinking their property is worth more than it actually is. Conversely, the property could actually be worth a lot more than an online valuation tool says it is and the owner could incorrectly assume they can’t afford to upgrade based on this misinformation. It can also be misleading for buyers who think they can base their offer or need for finance on an online valuation.
There is a better way
It costs nothing but a few minutes of your time to have a professional property appraisal done. When conducting an appraisal we not only compare your property to similar recently sold properties in the area (comparing apples with apples based on what current buyers are prepared to pay) but we also conduct a physical inspection inside and out to see the current state of the property and all the hidden value an online tool will never see.
If you would like to know what your home is really worth, call Shelley on 0417 963 670 or Mark on 0411 552 309.