Imagine you go to the doctor for a routine check up and she says, “I found a lump in your left leg. Another patient of mine had something similar and I had to amputate his leg. Therefore, I think we should amputate yours.”
Would you get a second opinion or would you make a yes/no decision based on her diagnosis?
Most of us would probably consult a couple of other doctors before making such a big decision. You’d probably wonder if the lumps are as similar on the inside as they are on the outside. You’d also wonder if there was anything you could do to improve your health, and thus the diagnosis.
In other words, you’d want to weigh all the possible factors that could make your lump different from the other person’s.
However, when you plug your home’s address into one of the many free home value estimators available online, a lot of people simply accept the location-based figure it gives us at face value. It might be shockingly low or breathtakingly high. We then start to make life-altering decisions about whether we should sell our home based on this one opinion.
Richard Batts, one of central Florida’s top real estate agents, says, “there is no way you can accurately give an estimate on the price of a home by using a free home value estimator — they are very, very misleading.”
According to US News & World Report, there are at least half a dozen reasons online home value estimators so often fail to hit their mark.
Among these reasons are the uniqueness of a home compared to others in the neighborhood, a rapidly changing market and a general lack of data for your location.
We decided to put our proverbial lab coats on and do the ultimate experiment on the leading free home value estimators:
- Bank of America
- Fifth Third Bank
These tools do not require you to register for an account nor provide any personal information.
The guinea pigs include five properties located throughout the US, all of which were last sold about two years ago:
- A 1-bedroom condo in New York City
- A 4-bedroom house in southern California currently owned by a celebrity
- A 3-bedroom townhouse in Cleveland, OH
- A recently constructed 5-bedroom mountain chalet in Vail, CO
- A 4-bedroom house in one of the “most American towns in America,” Wichita, KS
Home Value Estimate Experiment #1:
1-bedroom condo in New York City’s Financial District
Background: This unit was purchased in June 2014 for $999,000. It boasts one bedroom, 1.5 baths and just under 1,000 square feet.
Our home value estimators produced the following results:
- Zillow’s Zestimate: $1,244,350
- RE/MAX: $1,214,000
- Epraisal: $1,133,596
- Fifth Third Bank: $1,082,000
- Bank of America: $1,008,593 – $1,309,988
- Realtor: No estimate
- Chase: No estimate
Total discrepancy: $301,395 Average: $1,165,421
While there is a range in values, all estimates agree that the price has increased from the time it was last sold. Overall, not a terrible outcome.
Home Value Estimate Experiment #2:
A 4-bedroom house in Calabasas, CA currently on the market. (Current owner: Kourtney Kardashian)
Background: Bought by the oldest Kardashian sister in 2014 for $2,975,00, this house has 4 bedrooms, 5 bathrooms and is a whopping 5,400 square feet.
- RE/MAX: $3,291,600
- Fifth Third Bank: $3,167,000
- Zillow’s Zestimate: $3,008,782
- Epraisal: $3,005,929
- Bank of America: $2,842,283 – $3,473,901
- Realtor: $2,722,795
- Chase: $2,432,480 – $2,855,520
Total discrepancy: $1,041,421 Average: $2,993,096
This is a very big difference. In four of the estimates, Kardashian makes money on the sale. In two of the estimates, she loses money.
Home Value Estimate Experiment #3:
A 3-bedroom townhouse in Cleveland, OH
Background: This 3-bedroom, 4-bath townhome has over 2,000 square feet (and an elevator!) It was purchased in 2014 for $325,000.
- Realtor: $343,094
- Fifth Third Bank: $317,00
- Zillow’s Zestimate: $299,512
- RE/MAX: $295,000
- Chase: $289,520 – $326,480
- Epraisal: $287,991
- Bank of America: $245,000 – $384,125
Total discrepancy: $139,125 Average: $308,840
Once again, these estimates show the potential for the owner to make and lose money if they were to sell now. Bank of America’s range provides the high and the low for this property.
Home Value Estimate Experiment #4:
A recently constructed 5-bedroom house in Vail, CO
Background: This 5-bedroom, 6-bath chalet is over 5,300 square feet and has unobstructed views of the mountains. It was built in 2014 and sold to its owner last year for $4,750,000.
- Zillow’s Zestimate: $5,098,606
- Fifth Third Bank: $4,626,000
- Bank of America: $3,492,607 – $5,946,927
- Epraisal: $2,583,036
- Realtor: $1,780,382
- RE/MAX: No estimate
- Chase: No estimate
Total discrepancy: $3,318,224 Average: $3,921,260
The online estimators didn’t know what to make of this one. Perhaps because it was built so recently or because there aren’t much sales data on the neighborhood, the estimators failed us greatly here.
Home Value Estimate Experiment #5:
A 4-bedroom house in the heartland
Background: With 4 bedrooms, 3.5 baths, and over 3,100 square feet, this family home was sold last year for $230,000.
- Zillow’s Zestimate: $274,058
- Realtor: $273,980
- Fifth Third Bank: $250,000
- RE/MAX: $237,400
- Epraisal: $236,499
- Chase: $204,680 – $271,320
- Bank of America: $108,783 – $301,171
Total Discrepancy: $192,388 Average: $239,766
Once again, Bank of America provided the highest high and the lowest low in their range. However, 5 of the 7 tools provided relatively close estimates.
What did we learn from all of these free home value estimators?
We learned free home value estimators shouldn’t be the final say in your decision to sell your home, but they’re a good place to start. If the property in question isn’t new construction, and it’s located in an area with plenty of recent sales data, it is possible to get a fairly accurate idea of its value.
As Batts notes: “[Home value estimators] have no idea what the inside of the house looks like; have no idea what’s been replaced; have no idea if it has a new roof; they don’t have any of that information.”
We also learned that despite their shortcomings, consulting several of these tools can provide a decent average.
Our team at HomeLight ran with this principle and created a free home value estimator that looks at the estimates from five leading brands, and gives you a range based on these figures.
While it still can’t perfectly predict your home’s value, it’s one step closer to helping you make a good decision about selling your home. If nothing else, it can start a useful conversation with your real estate agent.
So, what are the next steps?
If you checked the home value estimators and have some idea of what your home may be worth, the next step is to contact a real estate agent to get a real, physical, home value estimate.
You may find that the value the agent assigns is way off from your online home value estimates.
Agents like Batts use their long-cultivated knowledge of your area to give you the most accurate listing possible. Whether it’s lower or higher than you were expecting, you should feel comfortable enough with your agent to ask how they reached that number.
Bottom line: if you think it’s off, it probably is. Get a second opinion.