No matter if you are a real estate investor, home owner, seller, or looking to buy one day in the future, there are a few reasons that you cannot trust the automated valuation models in the world like Zillow. And these are thing things we are going to discuss in this article today.
I am a fan of technology and instant gratification like the next guy, but this invention has been more of a problem in my eyes than a solution. First of all, you have to understand that I was a real estate appraiser once upon a time and therefore have a little bit of insight on these automated valuation models. But one of my major grips is that people are using them as if they are accurate and they are in the know. Quoting some of these figures can be just as wrong as blindly following what is being said on the MLS. You have to understand that people make mistakes and there are errors all the time in this system and the information there is not always true. The same is with these automated valuation methods that are basing it’s decisions on information that may not always be accurate.
Secondly, my grip with this system is the big one. It doesn’t take into account the condition of the homes around you, nor the home that is at the center of the valuation question. More detail, these systems show you all the homes that have sold in your neighborhood, but are they similar to your home. Do they have the same number of bedrooms, square footage, similar year built, quality of construction, or even type of home. These are all very important elements when determining the value of a home.
However, the biggest one that cannot be measured by these automated valuation methods are the condition of the home. At what state of repair does the home currently exist? This is a fact that everyone and homeowner has to deal with. The longer you have a home, the more repairs it needs. And these systems are not able to figure out how much repair has been done, when, and how much needs to be done on a property. All they can report on is what it sold for. And you have to be careful or mindful enough to realize that you have to notice when the property sold as well. Because if a property sold in 2005 for $200K, it doesn’t mean that it will sell for nearly that much today as the market has changed significantly.
The bottom line is these automated services can and never will replace the insight, experience, and ability of the appraiser. And just because you are more aware of properties that have sold in your neighborhood, there are a lot more factors that go into value than just these. If you are serious about knowing the value of your home, learning how to invest in real estate, or one that you are about to invest in purchase or sell, then you should consult the services of a licensed real estate appraisal professional and leave the Zillow’s of the world alone.
