Yes, they work. But are the prices valid? That’s another story. Let’s listen in as the San Jose Mercury News (motto: We’re a newspaper just like Burbed is a real estate blog, haha!) explains why the valuation models don’t agree with each other.
By Pete Carey, San Jose Mercury News
POSTED: 12/27/2013 05:00:00 PM PST; UPDATED: 12/28/2013 06:17:12 AM PST
You’re likely to get a warm fuzzy feeling if you look at what your home is worth on Zillow, Trulia or any of the other real estate sites that provide values for millions of houses. Home prices have risen rapidly, and the value these sites assign to your home is sure to reflect that.
But don’t carried away by a single Zestimate, SmartZip quote or Trulia estimate. While they are fine for spotting trends, these home valuation services come with a caveat: they offer rough approximations by computer programs. If you want a more precise estimate, hire an appraiser, talk to a real estate agent or check around your neighborhood and see what homes are selling for.
The sites all use what’s called "automated valuation models," or AVMs, to make sense of mountains of data, typically drawn from recent sales, property history, size and number of rooms, market trends and other factors that influence price.
We can’t believe they spent all that trouble writing an article that says, “If you want to really know what your house is worth, hire an appraiser.” There are multiple models out there, but this piece won’t tell you how they differ, or why. We did learn that Santa Clara County prices are more likely to be correct than Alameda County, but again, no explanation why.
We know why! It’s because the Real Bay Area’s prices only go up, and all the models built that in. Feel free to speculate on what’s going on with the AVM of your choice and why your house is So Special that the price estimates are Way Too Low. Unless you’re buying, in which case they are Way Too High.