Who can best judge what a piece of real property will sell for?
We all know the answer to that: The best estimate of the value of real estate will come from an experienced real estate appraiser, preferably one with a lot of experience in the neighborhood where the subject property is found.
After that, a Broker’s Price Opinion — same stipulations — will come second. In certain very homogenous neighborhoods, a Broker’s Price Opinion may be just as accurate as a full appraisal — and a lot cheaper.
Third place belongs to an experienced agent’s Comparative/Competitive Market Analysis. This can be very accurate in homogenous neighborhoods, substantially less so in areas where the homes or lots differ significantly from property to property.
Last place goes to the results produced by an Automated Valuation Method such as Zillow.com or NetValueCentral.com in the Phoenix area. I have written a lot about the defects in Zillow’s methods and practices, as has Sellsius&176; Real Estate blog. The Cliff’s Notes: An AVM does not evaluate houses, but rather statistics and records about houses. It cannot, for an extreme example, tell you whether the house is still there at the time of the evaluation.
It is fairly common to hear people say that AVMs will get more accurate in time. In fact, there is a finite limit to how much they can be improved. A CMA is essentially an all-paper calculation, with no inspection of the property on the ground. But a CMA is produced by an agent who has a great deal of on-the-ground experience, most of which will never be encoded into an AVM’s software. And nothing that would be considered an unzillowable factor — landscaping, decor, orientation, views, etc. — can ever be automatically accounted for by an AVM.
But: The other end of this question is need versus costs. If you want to know what your supervisor’s house is worth — use Zillow.com. It costs nothing, and close enough is good enough. If you need to know what to offer on a house you want to buy, you need a CMA at least. The good news is, your agent will probably provide it for free. The same is probably true for a Broker’s Price Opinion, which you will want if you are planning to sell a home. And if you need to know the value of a piece of real property to a very high degree of accuracy — for instance to qualify for a mortgage — you’re going to pay $300 or more for a full appraisal.
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Simon says:
Another free estimator from Lending Tree. http://www.domania.com/valuecheck/index.jsp?esourceid=489460
However, these computer models are based on recorded home sales but typically sales records are not available to the public until 6 weeks after. These days, listing prices are dropping like hot potatoes; a house at my street corner reduced its asking price by $300K this weekend! At time of extreme price fluctuation, none of these models works. You should compare the ASKING price of the homes in the neighborhood, go to the open house, write down what you like and don’t like about each, then go from there. If you give youself time to get to know the neighborhood before you bid, your comp is going to be as good as the agents’ or the appraisers’.
September 18, 2006 — 6:24 pm
Mike Kennedy, Cert.Apprsr.NY says:
As long as BPO’s, CMAS, & AVMS are not required to address the Highest and Best Use (i.e. legally transferrable) and ignore interior inspections, zoning and use violations,and are based solely woefully incorrect and/or very dated public info data records for properties……all three are as reliable as throwing spaghetti on wall. ……something may actually stick. Need an Appraisal, Hire an Ethical, Experienced, Certified, Appraiser in your LOCAL market……and pay for it. With all the other “methods” above……..you get what you pay for.
September 24, 2006 — 6:06 am
Dave Bignoli says:
You state that Netvaluecentral uses an AVM model. NVC uses no mathematical modeling in any part of it’s program. NVC reports history for a selected area and nothing else. Averages are calculated based on what is selected but the user decides what is selected. Approximately 50% of the licensed appraisers in Maricopa County use NVC as a data source. Russell Shaw, mentioned prominently on this page, accessed the NVC data base over 1,726 times.
April 24, 2007 — 10:49 pm