FAKE NEWS: Property Value Apps Give Incorrect Prices
Wayne MorganPosted on 19 Nov 2018
Why Home Value Estimate Tools Aren’t as Accurate as You Think!
With the market in its current state of unpredictability, buyers, sellers and unfortunately agents, are relying more an more on these 'property value' apps to determine prices.
"I am having many conversations with buyers at open homes telling me that they know what the home is really worth" Wayne Morgan says. "They believe these apps to be a true valuation and not an 'estimate' and sometimes 'guesstimate'. Often we see buyers stading in the yard on their apps determining what price they should pay for the property. These programs often 'guesstimate' prices on comparable sales that are completely irrelevant".
"We watched a property value on a townhouse in Carina go down $100,000 in value every week on one of the major property apps" said Wayne. "It eventually got so low that it couldn't even determine a value anymore. The market in Carina had not changed and the townhouse was worth at least $360,000, but this app was telling buyers it was worth $116,000 and decreasing weekly". This property has now been released to the market with a price and the app is still telling us it cannot determine an estimate.
These apps work off data that becomes public information after a sale. They compare between houses based on the number of bedrooms, bathrooms, car parks, and land sizes. There is a big difference between a 4 bedroom home that has 200m2 of floor area, is dated and needs new bathrooms and kitchens - to a house of the same age that is completely renovated and covers 350m2 of floor space. "It's hard for a computer to know all the data on a home" says Wayne.
While not all of these apps are incorrect and some can come pretty close with estimates, there are definitely some red flags you should keep an eye out for:
1. Different values on different apps - companies arrive at different estimates as they aren't all using the same facts.
2. It seems too good to be true - if you are looking at a property online and the real estate has it advertised at one price but the app says its value is significantly lower than the app most likely doesn't have enough data to accurately calculate an estimate.
3. The price is too high for the area - the same as point number two if the value is too high the app doesn't have the right info.
When buying or selling a home it is always best to seek out the advice of your local real estate experts or get a valuation from a registered valuer. These professionals can offer you real advice on market values with real comparisons. In saying this, sometimes sellers turn to agents outside of their area of expertise to price their property. As the market changes there will become much wider variations in selling price on a street and suburb level. In particular suburbs, there can be pockets of property developments that have city or water views or are in low valleys with a possibility for flooding. Using a local area expert will become an absolute must!
The moral of the story is to do your homework and not rely on GUESSTIMATES!