Online Home Valuations - To consider or to Ignore?

As technology advances, the rules of real estate continue to evolve. I remember when Google Earth first came out and real estate agents were amazed at being able to view properties from above. It felt like we were secret agents, with the ability to see homes from the sky.

Today, new innovations have taken us even further. Agents must adapt to these changes or risk falling behind. One key piece of technology reshaping the industry is the online home estimate or valuation.

In New Zealand, popular websites such as Trade Me Property, Realestate.co.nz and Oneroof.co.nz (among others), provide online estimates to help homeowners gauge their property's value. While convenient, these estimates are not always accurate.

These tools are often used by homeowners at the beginning of their sale process, allowing them to get a feel for the market. Given the fluctuations in the housing market, especially post-COVID-19, it’s understandable that people want to know current trends before buying or selling.

However, there are significant issues with these sites. They use algorithms that calculate the value of homes based on price per square meter in a given area. This approach sounds straightforward, but it has several flaws.

Why They Aren’t Always Correct

Reason 1: It’s Automated

Automated estimates lack the nuanced appraisal that a human real estate agent can provide. They don’t involve detailed, in-person assessments. Instead, these systems generate estimates based on existing data patterns, without any oversight from market-savvy humans. Similarly to a desktop appraisal, without seeing the property IRL, how can you determine the accuracy of a valuation?

These systems cannot account for future market movements or off-market developments. Their predictions are based solely on past data trends.

A real estate agent in person appraisal offers a more reliable estimate, considering local market conditions, future developments, and other tangible factors.

Reason 2: They Look for Patterns

Online valuation tools rely heavily on algorithms that look for data patterns. While this might seem sophisticated, real estate is influenced by many factors beyond simple patterns.

For example, consider two homes in the same New Zealand suburb: one a modern, renovated property and the other in a state of disrepair. Both may have the same square metreage, but their actual values are vastly different. Automated tools often miss these distinctions, leading to inaccurate estimates.

These tools also average prices across entire postal codes, which can be misleading. A house in a highly desirable part of a suburb can have a significantly different value than one in a less desirable area, even within the same postal code.

Reason 3: They Can’t Account for Unique Property Values

Automated systems cannot capture the unique attributes of a property. Factors such as renovations, views, and special features are often overlooked. For instance, a home with a stunning view of Auckland’s Waitemata Harbour or Rangitoto, or a unique architectural design will have added value that a computer algorithm might not recognize.

Even websites like Trademe.co.nz acknowledge this limitation, noting that their estimates may not account for unreported home improvements or unique features.

The Role of Real Estate Agents

Despite the rise of online estimators, real estate agents remain crucial. Just like hiring a lawyer to represent you in court, buyers and sellers alike need the skills and expertise of a real estate agent. It’s an infrequent, emotional, complex transaction. Having a great person at your side can be really valuable to obtaining the best result.

Online tools can be useful for browsing available homes, but for accurate valuations, consulting a professional agent is essential. Agents provide personalized insights, taking into account all the variables that online tools might miss.

So, while online home estimates are a useful starting point, they should not replace the expertise of a real estate agent. For accurate and reliable property valuations in New Zealand, it’s best to consult a local real estate professional. Contact us today for a free market appraisal for the current market value of your home.