In the old days, putting a price on your home took a little
work. You might have enlisted the help of a realtor, who'd
compile values of similar homes recently sold in your
neighborhood. Today, though, you can get an idea of your home's
worth in less time than it might take you to read this article.
The problem is that many of those values are wrong -- really
wrong. And that has implications for home buyers and sellers --
and investors, too.
(Nasdaq: Z) , for example. Click over to Zillow.com, "Your Edge
in Real Estate," and just type in your address. Boom -- it's
likely you'll immediately be shown an aerial map of your block,
with estimated values for your home and those of your neighbors.
You'll also find an estimate at Realtor.com, operated by
(Nasdaq: MOVE) . What could be handier if you're thinking of
selling and want to know what price you might fetch for your
There's a problem, though. It seems that many of these values are
not even roughly the right estimates, but instead reflect huge
The Wall Street Journal
, Alyssa Abkowitz explored these errors, offering the example of
one California homeowner who got a $640,500 valuation from an
online real-estate website, considerably less than the $1.5
value offered by a human appraiser.
Indeed, even when I looked up my own home's value, I saw that
it was listed on one website as having 2.5 baths. Unless there's
an extra toilet in my house that I haven't noticed yet, that's an
error, and one likely to affect the estimated value. Another site
listed it correctly with two bathrooms, and offered a lower
This is a big deal according to Abkowitz: "Together, four of
the biggest sites that offer home-value estimates get 100 million
visits a month, with Web surfers using them to determine what to
ask or bid for a home, or whether to refinance."
Problems despite admissions
It might seem like this isn't a big deal. For one thing, the
companies themselves stress that the valuations are estimates and
even recommend checking with appraisers or real estate agents.
And if a valuation is half as much or twice as much as it should
be, most folks encountering it will likely dismiss it.
But many errors are at least a little more subtle than that,
and they can wreak havoc on your home plans. Imagine that you're
trying to sell your home, which has been professionally appraised
at $200,000, a reasonable price given the location and our
current housing market. If one or more online sites value it at
$160,000, you may have trouble with prospective buyers who looked
up its value online.
What to do
If you're planning to buy or sell a home, take the online
estimates with a few grains of salt. If your own home is being
incorrectly valued, you may be able to submit information to
change its value -- such as pointing out a finished basement, or
the actual lot size.
Meanwhile, if you're an investor who was looking at companies
such as Zillow and Move as possible investments, it's reasonable
to think that if awareness over errors grows, the companies'
reputations and futures might suffer. But remember that the
companies are upfront about errors and are working to improve
You can also broaden the scope of your stock hunt if you're
profiting from the eventual housing recovery
. (Hey, it might not be quite around the corner, but
it will happen sometime
.) Consider, for example, companies such as
) . They'll pay you an
while you wait for the recovery, and if they're not ringing up a
lot of sales tied to new construction now, they
serving many who are remodeling or repairing homes.
Once new housing construction regains its footing, companies
such as timber specialists
Plum Creek Timber
) , and wallboard maker
) , should start
posting stronger numbers
The errors in online home values serve to remind us that it's
always good to be at least a little skeptical of the data you're
given. That can help in your investing research as well as when
you enter the real-estate arena.
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