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Real Estate Valuation Online — What's It Really Worth?
By Frank Gallinelli

The recent launch of Zillow.com, a free online home valuation and data reporting service, received a tremendous amount of press coverage, including articles in the Wall Street Journal, LA Times, and several other major publications. Zillow is noteworthy because it offers its data—collected primarily from local tax assessors—free of charge, but it's not the only website that provides automated estimates of value. In this article we’ll take a look at several such online services, examining the breadth and depth of data they provide.

Generally speaking, online valuation websites use an approach much like that of human appraisers—they look at sales price histories for comparable properties in an area, and adjust for distinguishing characteristics of the target property to estimate its market value. Some sites also take into account local property tax assessments, comparing them with sales records to derive a trend line that they can apply against the target property's assessment.

The reports generated by the various sites differ in regard to the scope of data they include, and the way they present it. Most of the services we reviewed listed sales data for comparable properties near the target property as well as maps of the subject and comparables. Let's take a closer look at each service.

Zillow (zillow.com)

Zillow’s free service, supported by ads on its website, starts out with a map (based on the Google Maps system) showing the target property and a sampling of surrounding comparable properties that had recently sold, along with the recent sale prices. You can click to see more details on the target property, including square footage, lot size, and a chart of Zillow’s estimated value over the past one, five, or ten years.

The site provides a great deal of data, including key information (price, bedrooms, baths, square footage, lot size, year built) as well as price per square foot of building and of land, and distance of each comp from the subject.  The user can sort the data on any of these items or click through for details and a current value estimate on any of the comps.

The centerpiece of the Zillow report is a “Zestimate,” the site’s automatic estimate of a property’s value. Accompanying the Zestimate is a range of values reflecting the amount of data on which it is based, i.e. the extent of data available for valuing the property. For our test properties, the Zestimate came close to our expectations, but this may not always be the case. Older homes that have been modified to differ from neighboring homes, or those with exceptional features like a scenic view, are the most likely to throw off Zillow’s calculations. Fortunately, Zillow gives you a work-around if you think the source data is incomplete or inaccurate. You can override some of a Zestimate’s parameters, such as square footage, room count, and improvements to adjust the estimate of value.

Strengths: Free, great-looking maps and printouts, ability to customize the estimate and choose your own list of up to ten comps from a list of 50.

Weaknesses: The quality of the estimate depends on the availability, accuracy and completeness of the local assessor’s data.  Shortcomings in that data can lead to misleading estimates, especially if you're not personally familiar with a property's characteristics.

RealEstate ABC (realestateabc.com)

RealEstate ABC is another free site where again you have to do nothing more than enter the property’s address.  Like Zillow, it returns a Google map of the subject and comps, and a list of comparables with all of the key data.  Also like Zillow, the user can sort the data or click through to a report on any comp.

RealEstate ABC has the nicest interface of any we’ve seen.  It shows a list of 30 comps, each with a check box.  The system has already checked off the ones it thinks are the most appropriate, but if you know the neighborhood better you can check and uncheck as you see fit.  The estimate of value will change with each click.  It also lets you use “value sliders” to adjust the estimate.  You can slide a bar left or right to indicate that the particular market is currently hot or cold, or use another set of sliders to indicate that the subject property’s interior, exterior, lot size, view or privacy ranges from worst to best in the group.

Strengths: Excellent interface, easy for the user to customize the selection of comps and to adjust for a few distinguishing features.

Weaknesses: Doesn’t allow correction of errors in data about subject property, or the ability to account for the special features or improvements.

Domania/RealEstate.com Home Price Check and Value Check  (domania.com or realestate.com/avm/)

Domania doesn't charge for its Home Price Check or Value Check service, but it does make you enter your contact information, including telephone number, for the Value Check service  

Home Price returns a list of sales on the same street or in the same neighborhood as the subject property.  In our tests, it often failed to recognize valid zip codes or addresses and in one case the most recent sale reported was four years old. Other services found plenty of current comps for that address.

Value Check, on the other, returned an estimated range of values but no other information, i.e., no neighborhood sales data on which the estimate was based.  It did say, “You will be hearing from a local real estate agent shortly to receive your more detailed report.”

Strengths: Free.  The Home Price Check, when it gives results, might provide useful comps, although no value estimate. Unlike Value Check, it does not require your name, email and telephone number.
Weaknesses: No map of comparables. A limited amount of data returned. No opportunity to correct data about the subject property or to choose comps. Both Home Price Check and Value Check service failed to yield results for some of our searches. Value Check gave only a high and low estimate.

Ditech (ditech.com/calculators/appraisal/form.do)

Ditech.com requires no more than the street number, street name and zip code for their free eAppraisalSM.  Like Domania’s Value Check, it gives only a high and low value estimate and shows no comps, but is does display basic information about the subject property.  Unlike Domania it does not require that you provide your name and telephone number.

Strengths:  Free. Requires just property address, no other identifying info.

Weaknesses. No map of comparables. No opportunity to correct data about the subject property or to choose comps. No comp information. Provides only a high and low estimate.

HomeSmart Reports (homesmartreports.com)

HomeSmart Reports sells a “HomeSmart” report for $6.95 and a “HomeSmart Value” report for $24.95. Both reports include recent sales prices and basic stats for 15 comps, along with a map (MapQuest.com-based) of their locations. For the subject property, you’re likely to get a strong sales history going back several years that even shows refinance dates and amounts.  You’ll also get more detailed information about the amenities of the subject property, as well as first mortgage amounts for the comps.

The “Value” report also includes a Home Value Estimate, along with a confidence score for the estimate and a range of possible values.  We thought the confidence score was especially important, because it gave the user a good sense as to whether or not the underlying data was strong enough to yield a credible estimate of value.

HomeSmart prides itself on its Market Summary, which rates the strength of a market, calculates recent appreciation based on “paired” sales (repeated sales of the same property), and shows a foreclosure rate.

Strengths: Extensive data, especially regarding recent sales and financing. The confidence score adds a valuable reality check.

Weaknesses: Not free, but if you are actually buying or selling a house (as opposed to just satisfying your morbid curiosity) $24.95 is a trivial cost. Not interactive, i.e., you cannot edit the selection of comps or any of the data about the subject.

The bottom line? 

If you run a group of properties through all five of these systems (as we did), you’re likely to find that each online valuation site will give you a different – sometimes a very different – estimate for the same property.  They may not all be using the same comps and each is probably using a different proprietary algorithm that works better with some data sets than with others.  So our first and best advice is that you should not expect to type an address into any of these sites and get back a value that’s carved on a stone tablet. 

What you can expect is that, at least with most of these sites, you will get back a good deal of data that you can combine with your own judgment to develop a reasonable idea of a property’s value.

In our opinion, the weakest offering was Domania’s Value Check which gave the least information in exchange for personal contact information. Its Home Price Check at least gave us a list of comps (when it recognized the zip code).  Ditech.com provided a similar high/low estimate but was much quicker because we didn’t have to provide contact info.

If you use HomeSmart (and we think that’s a particularly good choice if you don’t feel you’re very familiar with the location of the subject property), you can examine the projected value as well as the high-low range in the context of the confidence score, and make an informed estimate as to a likely range of values. You’ll also get plenty of data about comps and strength of market.

If you feel you do have a very strong familiarity with the area, then you might be wise to try both Zillow and RealEstate ABC, but not necessarily take their initial estimates at face value. You may be aware – but the databases have no clue – that the uniformly smaller tract houses on the older north side of Elm St. are not really comparable to the houses on the south side of Elm even though they are closer than some other comps.  Zillow and RealEstate ABC are systems where you can apply your own knowledge to make adjustments and to pick and choose comps that are truly comparable.  You still shouldn’t expect to nail down an exact number, but these sites provide so much useful data that you ought to succeed in identifying a value range that makes sense.

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