Excellent article-Thank you Tara-Nicholle!

          REThink Real Estate

By Tara-Nicholle Nelson
Inman News-July 25, 2011

Q: Knowing that I  would be selling my home, I have been following price ranges for comparable  properties to my home on a couple of major real estate websites. Now that I am  ready to list, all the agents I’ve talked to say that the websites are so out  of line that their recommendations are worthless. What a shock!

A: Real estate websites have transformed the whole experience  consumers have of homebuying or selling — they have made public what used to  be private and difficult to get to — namely, listing and sales data about homes  across the country.

Several of these sites offer nearby recent sales, with the  promise that savvy sellers like yourself can simply go online, input your  address and find out what specific homes in your neighborhood have sold for  lately — some even go so far as to take the leap from what those homes have  sold for to placing an estimated value on your home.

These sites try hard to do a lot of the work for you —  surfacing the homes they see as comparable to yours. However, these are, at  bottom, computer programs.

So, what’s involved is a computer taking the  description of your home from the public records (which usually reside at the county  recorder’s office and in their databases) or from a recent listing (if your  home has been sold in the past few years), in terms of the number of bedrooms,  bathrooms and square feet, primarily, and pulling out the closest homes to  yours that have sold recently that have similar data on record.

And therein lies the rub. The computer can’t necessarily  distinguish nuances in a property’s condition or aesthetics, nor does it always  correct for whether the house two blocks over was a short sale or a  foreclosure.

Depending on where you live, how similar homes are to each other  in your area, the level of sales activity near your home and the level of  accuracy found in the public records for your house and nearby homes, these  sites can offer very comparable “comps” — or comparables that aren’t  really comparable at all.

If you live in a fairly cookie-cutter subdivision where  several homes just like yours have sold very recently, you’re likely to get a  good set of comparables, and a value estimate that’s at least in the ballpark. But  in many areas, lots of fairly common scenarios can come between you and a good  set of automated comps:

  • if your home is older and has had a lot of improvements  and even additions that are not in the county records, you’re likely to get bad  comps;
  • if homes in your area are very different from each other,  you might get bad comps;
  • if you live in a neighborhood very nearby another  neighborhood where homes have a much higher or lower value than your area’s  (say, because they belong in a better school district or even on the other side  of the city limits), you’re prone to getting bad comps;
  • if your home is in an area where homes are dense, the  algorithm might jump over many very nearby properties to get to a relatively  dissimilar one even a half-mile away, and that can give you bad comps.

The listings provided by the sites can be very useful for  homeowners trying to stay on top of what homes around theirs are selling for —  not listed for, but actually selling for. They are less useful, in my opinion,  at placing values on properties; the sites that do this usually have their  accuracy rates listed somewhere on the site, and I haven’t yet seen one that’s  impressive.

But when it’s time to actually list your home, or figure out  what it is worth, no computer — no algorithm — is as accurate as a living,  breathing local real estate professional who sees and sells all the different  specimens of homes in your neighborhood and sees firsthand what ready, willing,  qualified buyers actually pay for them, day in and day out.

I think it’s  important for sellers interviewing listing agents to discuss the online  comparables with prospective listing agents, but not as a counterargument to  what the listing agents recommend you list your home at.

Rather, it’s a smart way to see what the agents know — and  what you can learn — about the other properties in your area.

Tara-Nicholle Nelson is author of “The Savvy Woman’s Homebuying Handbook” and “Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions.” Tara is also the Consumer Ambassador and Educator for real estate listings search site Trulia.com. Ask her a real estate question online or visit her website, www.rethinkrealestate.com.