You’ve probably used a home value website at some point. What’s the most accurate home value website, and how can you tell which to trust? —-
Whether you’re considering a particular home to buy or you’re just snooping around fancy neighborhoods, you’ve probably used a home value website at some point. The internet has made it easier than ever for curious onlookers to find out more information about real estate — without necessarily having to talk to a real estate agent, appraiser, or mortgage lender first.
There are, however, a lot of sites out there with numbers to share! How do you actually know which is the most accurate home value website?
Well, spoiler alert: An algorithm-driven website is never going to be a substitute for a real-life expert. But home value websites can be an interesting starting point and — let’s face it — once our browsers figure out that we’re looking at homes for sale, we’re going to see related ads in everything from our Instagram feeds to the advertisement sidebars on your preferred news outlet.
To learn more about which home value website is the most accurate, we spoke with real estate professionals and took a deep dive into the research behind these platforms.
How do home value websites actually calculate value?
As you’ve surely assumed, there’s no live human on the other end of home value websites manually updating the database for every recorded property on a daily basis.
Instead, values are calculated by automated valuation models, or AVMs. These models are complex algorithms that generate values based on lots of different data — everything from online property records to pricing trends to recent sales of similar properties.
“Valuation websites typically base their numbers on public and user-submitted data,” says Kansas City property appraiser Nick Stoddard. “The information is taken from multiple listing services, county and tax assessor records, and real estate brokerages to provide an estimated value.”
Stoddard cautions that while home value websites can be viewed as a next-best option, they’re definitely not as accurate as an appraiser who uses real-time, hyper-local information.
And while AVMs may utilize regression analytics to help adjust for differences between square footage otherwise comparable properties, they don’t take into account upgrades or renovations that a homeowner may have completed.
“These sites rely on generic data, like square footage, number of rooms, and value of similar homes,” says Stoddard.
“Let’s say you upgrade your basement after purchasing your home, or replace the carpet with hardwood flooring — home valuation websites don’t factor in those upgrades due to how their algorithms are designed.”
How is accuracy measured on home value websites?
Valuation accuracy is measured using something called an “error rate,” which is exactly what it sounds like: A calculation of how often the algorithm gets it wrong.
In this context, the error rate refers to how frequently the AVM calculates a value that is markedly different from the actual sales price of a home.
There are countless variables at play when it comes to determining the final sales price of a home; most notably, the market conditions at the time of negotiation, and the personal circumstances of both buyer and seller.
Buyers with deep pockets and an eye for what they want may be up for paying whatever it takes to make a particular home their own, while a seller with a rapidly approaching relocation date to another state or country may be eager to sell as quickly as possible.
No two homes or transactions are identical, so 100% accuracy — from any website or human — is actually kind of impossible. That’s why we’re usually shown a median error rate.
For just a second, let’s go back to statistics class. Remember the lesson on mean, median, and mode?
Mean is another term for the average, which is calculated by adding up all the numbers and dividing by how many numbers there are.
Median is the middle point in a range of data that has been arranged from smallest to largest.
Mode is the number that occurs most often in a data set, and sometimes there may be more than one mode.
So, the median error rate of a home value website essentially shows the middle point of how “wrong” the AVM was in either direction — whether estimating too high or too low.
But median doesn’t tell the full story
Zillow is among the most popular home value websites, and its Zestimate for on-market homes (meaning, homes that are currently listed for sale) has a median error rate of 2.0% as of February 2022. This is pretty good! And bonus points for the company’s transparency in explaining how their models work.
When viewing their nationwide statistics, you’ll see that the Zestimate gets within 5% of the sales price 82.2% of the time. It’s within 10% of the sales price 95.1% of the time, and within 20% a whopping 98.8% of the time.
This all sounds pretty dang accurate, right? And if you’re just skimming numbers without involving a real estate professional — Zillow isn’t a bad place to start.
But when you consider how many thousands (or tens of thousands) of dollars that a 5% to 20% variance can comprise when we’re talking about the sales price of a home, that median error rate can start to feel uncomfortably elastic. In fact, if you’ve studied recent home sales for just a couple of days, you could probably guess within 20% of the sales price on your own.
This being said, the Zestimate’s nationwide median error rate of 2.0% adjusts again when examining specific metro areas.
In Atlanta, Charlotte, and Colorado Springs, for example, the median error rate is 1.7%.
This error rate is even lower — just 1.5% — in Denver, Nashville, and Raleigh.
But take a look at markets like San Francisco and Seattle, and the Zestimate median error rate for on-market homes is more than 3%.
And it’s a whole different story for off-market homes
Zestimate’s median error rate jumps up to 6.9% for off-market homes, which — admittedly — isn’t surprising given how much AVMs rely on current data. If a house isn’t for sale and hasn’t been recently sold, there’s simply less available of-the-moment information from which the AVMs can pull.
Nonetheless, this means that the Zestimate for off-market homes is within 5% of the sales price just 39% of the time, and within 10% only 63.8%. Even guessing within 20% of the sales price only happens 84.7% of the time.
Looking at the Pittsburgh metropolitan area in particular, the off-market Zestimate error rate is 10.2% — well above the 6.9% national average — and only guesses within 5% of the sales price 27.5% of the time.
But we can cut a little slack for inaccuracies with off-market homes; there’s a solid lack of new information. And, unless you’re going to knock on someone’s door with a cash offer, if a house isn’t on the market, its sales price probably doesn’t matter right now anyway.
Why is there so much variance in home value accuracy?
Put simply, there’s a lot of variance in everything when it comes to real estate.
AVMs are based both on data and how similar homes are to each other, which is why online home valuations might be inaccurate due to missing details — such as upgraded flooring, a renovated kitchen, or updated bathrooms. Similarly, homes that are either exceedingly luxurious or uninhabitable fixer-uppers tend to be outliers that are tough for AVMs to value accurately.
Valuations can also be incorrect due to unique (and often unchangeable) differences about the home in question or one of its comps. A lakefront home compared to one that is landlocked, for example, or a house with a basement versus one on a slab foundation with no basement.
Neighborhood consistency is also a big factor in the accuracy of home value websites — the algorithms work best in neighborhoods where the homes are as cookie-cutter as houses can be. It will be much easier for an AVM to calculate value for homes in a new-construction development with minor differences between properties than in a longstanding subdivision with unique homes that may have been built decades apart.
All of these variables are further skewed when there’s a general lack of data in the first place. Rural areas can be difficult even for appraisers and real estate agents to price out — how do you draw comparisons when there isn’t much to compare to?
“I had a rural client a few years ago, and their home value was way off on a Zestimate,” says Amber Carlton, a real estate agent with ten years of experience in Fargo, North Dakota. “They had a very large home, and in that particular area, it’s the smaller homes that sell at a more affordable price point. The algorithm numbers weren’t accurately reflecting what their home would be worth, and they didn’t understand why they were getting such a low estimate.”
Carlton was ultimately able to explain to her client that the estimate was based on a computer model and didn’t accurately reflect the value of their home, but the story stuck with her as an example of how alarming AVM inaccuracies can be — for both homeowners and prospective buyers.
Basically, anything that might put a home in the “long tail” of error will contribute to inaccuracy from an online valuation model.
So, what ARE the most accurate home value websites?
As we’ve noted, Zillow is both popular and, all things considered, relatively accurate — at least when you’re searching for the value of an on-market home. The 1.9% national median error rate is currently the gold standard among consumer websites.
Redfin is another top-ranking home value site, and their median error rate for on-market properties is 2.23%.
Realtor.com offers home value estimation, but the company doesn’t share details about algorithm performance.
Trulia, meanwhile, has a page explaining how Trulia Estimates works — but at the time of this writing, the link to the accuracy report does not work.
Bearing all this in mind, are home value websites worth using?
Like most things in life, moderation is key. These sites can function well as a reference point, but you probably shouldn’t use any of them to strategize your financial future.
“It’s fine to look so you can see where price ranges are coming in, but always keep in mind that it’s only an algorithm,” says Carlton. “You really need to look through the homes in person — or at least look through photos online — to see what each home has that the other does not, to get a more accurate idea.”
For the most accurate idea of what a home looks like — and to find out what it’s really worth in current market conditions — your best bet will be to call in the help of an expert. Working with a great real estate agent is your ticket to finding the perfect home for your budget regardless of what home value websites say, but sometimes you’ll find a helping hand in the form of another homebuyer.
Similar to other valuation websites, HomeLight’s own home value estimator also uses the power of an AVM — but we take things a step further by contacting people and companies who are ready to buy a home in your area, and we ask them what they would be willing to pay for a particular home, providing a real-time assessment of value.
What’s the bottom line?
Above all, remember that even the most accurate home value website could change depending on the specific house.
Value is more than just square footage and an address — everything from a home’s condition to its unique characteristics is a factor, and there are many things that an AVM simply can’t know.
Some websites do have better, more up-to-date data in certain cities or states than others, so it doesn’t hurt to cross-check home value websites if you’re tempted to poke around. And remember that a value estimator that includes a human’s input will likely be a better fit for helping you assess a house, especially if it’s off-market.
But until you’re walking into a house with a buyer’s agent at your side and a mortgage lender ready to help you through the homebuying process, remember Carlton’s advice while pursuing home value websites:
“Keep in mind that it’s an algorithm, and take it with a grain of salt.”
Header Image Source: (Kari Shea / Unsplash)
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