News
June 2, 2019

What’s the house worth? It depends on who’s the source  

By KAREN RANDOLPH


KAREN RANDOLPH
2019 NETAR President

There’s a lot of discussion, confusion, and misinformation about something of big concern to homeowners who are selling this year. Buyers have a similar concern but from a different perspective. 

What we are talking about is the varied calculations to the question: “What’s this home worth?” 

Instead, buyers and sellers should focus on the accuracy of a current fair market value estimate done by their Realtor® and used as a benchmark for showings and negotiations.

The actual fair market value is determined when the property is sold.

Fair market value is defined as "the price a buyer will pay, and a seller will accept under reasonable and ordinary conditions."  This definition assumes neither is under pressure to complete the transaction. 

What consumers most often see – especially those doing do-it-yourself web research -  is estimates based on automated valuation models (AVMs). They are generated by algorhythms that have varying levels of accuracy. Some are pretty good; others are marginal to wildly inaccurate. These estimates are no substitute for a competitive market analysis (CMA) by a local Realtor®.

Still, a working knowledge of the existing AMVs is helpful to put them in the proper context, according to the National Association of Realtors® economists.

Some of the most common are:

- Realtors Property Resource® has two home value estimates, their AVM, and the Realtors Valuation Model® (RVM®). The difference is the RVM® uses the same data as the AVM plus Multiple Listing Service (MLS) Data. Both AVM and RVM® show the accuracy level of the estimate by giving estimate ranges and confidence scores. This resource is available for Realtors® only and allows a significant amount of expert customization.

- Realtor.com® uses tax assessment records, recent sale prices of comparable properties, and other factors to estimate home values. It’s free and publicly available.

- Homes.com’s estimate mainly uses public records. They test and benchmark the accuracy of their estimates. This estimate is free and publicly available.

- Zillow’s Zestimate is computed using public and user-submitted data. Estimates have different accuracy levels depending on the data of the property and location.  In many non-metro areas, it has a plus, minus range of up to 25%. It’s free and publicly available.

- Trulia’s estimate is very similar to the zestimate since it is part of the Zillow Group.

There are also websites that provide home value estimates by request or estimates using user input, according to the NAR economists. They include ForSaleByOwner.com, GuaranteedSale.com HomeFacts.com, HomeValues.com. Some banking and financial institutions like Chase Bank, Bank of America, The Federal Housing Finance Agency and others provide estimates with their other services. Plus, there are data companies like Attom Data Solutions and CoreLogic that market propriety AVMs.

 A local competitive market analysis was done by local Realtors® typically has a higher reliability factor.

The professional appraisal is the gold-standard used by lenders.

An appraisal is a detailed assessment performed by an independent professional appraiser.   It should include a physical inspection of the property, verification data through public records, an analysis of general market data, and the application of a valuation approach that is carried out according to professional practice guidelines. Lenders can use valuations in the place of appraisals for some deals that meet specific requirements.

NETAR is the voice for real estate in Northeast Tennessee. It’s the largest trade association in Northeast Tennessee, Southwest Virginia region representing over 1,200 members and 100 affiliates involved in all aspects of the residential and commercial real estate industries. Pending sales, monthly Trends Reports, and the regional market analytics can be found on the NETAR websites at https://netar.us/voice-real-estate-northeast-tennessee .

 

 

 

 

 

 

 

 

 

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