refinancing in 2015 at $275,000. In 2017, Redfin’s calculator valued this 1890 Victorian home (4 bedrooms, 1.5 baths, and 2,100 square feet) in a four-block area of “Grand Old Ladies” at $158,000. The apparent reason is that the six “comps” (comparable recent sales) included only 2 homes in this desirable neighborhood (over $300,000), while four others outside this small neighborhood, although close, sold for $150,000 to $199,000. Because the system doesn’t understand the makeup of the area and simply pulled prices from a broader geographic area, the arrived-upon price was far below what it should have been. These tools are worthwhile for obtaining “comps” of area sales; however, they are not highly accurate in arriving at a proper listing price.
EXAMPLE OF DIFFERING HOME EVALUATIONS
A buyer is interested in a home listed at $420,000. The online valuation determines the house is worth $440,000. Based on that estimate, the buyer offers the asking price. When a professional appraisal comes in at $400,000, and the existing tax records assess the home at $300,000, the buyer wonders
why the values are so different and whether he overpaid. The seller listed the home at $420,000 based on the online calculation of $440,00 thinking, at that price, the home would sell quickly and perhaps for even more. Why would the appraised value not be whatever a buyer was willing to pay? The fact that they paid $420,000 does not mean that is
the true value of the home. Certain factors may weigh in — undesirable businesses located near the property, for example. Online valuations cannot take into consideration the condition of the property or the qualities of the neighborhood. And unlike the definition that market value is what a seller is willing to sell
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