What You Need to Know About Those Online Home Value Estimates
It’s something every homeowner does when they decide to sell:
Obsessively check the estimated home value of their property on the websites of the big real estate “brands.” Zolo and Redfin have made it easy to give an idea of what to expect when offers come in — and a peek at what the homes of your neighbours, friends, and family are worth, too. However, like any tool or service that hints at certainty for things that are uncertain, the projected answer might not quite match your reality. In fact, the estimates might not even match from brand to brand.
That’s because these valuations primarily rely on algorithms to arrive at a number. These algorithms calculate a range of data points that affect value. Sounds simple, right? Well, that’s exactly where it gets complicated.
Understanding What Goes Into an Algorithm
Every brand’s algorithm is different. There are hundreds (maybe even thousands) of different data points that influence the price of a home: Interior/exterior features, the age of the home, the square footage, and the location, just to name a few.
Even if each brand included the same data points, the algorithm would weigh them differently. After all, some factors are just more important to a home’s price. Stainless steel appliances won’t affect value as much as square footage. Yet square footage might not matter as much as the neighbourhood.
Both of these elements of an algorithm come into play with comparable sales, a critical part of any home evaluation. In order to find the prices of recently sold homes that are similar to yours, the algorithm needs to find the properties that fit the bill, then evaluate those properties against yours.
While algorithms are kept secret for a reason, the big brands have been somewhat open about some parts of their processes. Here’s what you need to know:
How Zolo Calculates Home Values
Zolo estimates Canadian home values based upon many factors, including nearby homes, comparable properties, recently sold properties, Canadian Census data, location, and other real estate market information.
Zolo uses a proprietary method for evaluating your home online to give you an idea of your home's worth in the current Canadian real estate market and property valuation.
They even state on their website their home value estimator is a starting point for determining your home's value and is not an official appraisal or REALTOR® recommended selling price.
How Redfin Calculates Home Values
The “Redfin Estimate” of your home draws on data found in multiple listing services to arrive at a value for your home. Redfin mentions that more than 500 data points are considered, including market and neighbourhood info, whether the home has water views or if its located on a busy street.
Machine-learning software crunches the numbers frequently: The values are updated daily for homes on the market, and weekly for those off the market. Unlike Zillow, you can’t update any info about your home that could potentially impact the value.
Though Redfin says that their online home value estimates are the most accurate, the service still says that it’s a starting point.
The Takeaway: Computers Can’t Beat Expertise
While these online estimates can give you a general idea of your home’s value, your Realtor can consider the nuances that algorithms can’t. Whether it’s a recent update to your home or new trends with buyers in your area, a Realtor can consider the whole picture when creating a pricing strategy. For the most exact figure regarding value, a professional home appraisal can clear up any lingering doubts.