These comments are the writer’s own and do not necessarily reflect the current opinions and policies of the Real Estate Institute of Western Australia.
I was chatting with some colleagues about this topic earlier this week with the ensuing discussion prompting a revision of this important topic.
More and more buyers and those of us broadly interested in real estate spend much of our time looking for and researching property on line. A recent added service easily found on property and other sites is to offer browsers an opportunity to obtain an estimated “valuation” of a property.
At the push of a button, a third party data provider determines the market worth of a property based on a bunch of statistics provided by either agents or Landgate to neatly deliver an estimated value of a particular property of interest to the buyer.
It is worth trying this out; particularly if you’re after a good laugh. The results are, in the main, appallingly inaccurate and makes a mockery of offering the service in the first place. Banks are now offering the same rubbish “valuations” with ANZ even running a television campaign promoting it.
Sales evidence from properties that are totally irrelevant to the property being assessed are included whilst relevant ones are overlooked, the data itself is either flawed or inaccurate and the assumptions used in drawing the conclusions are necessarily vague and imprecise.
The computer does not know what is being offered for sale, it makes an assumption that the records it has from when it was last sold remains accurate today so it makes no adjustment for renovations, extensions or other improvements that may have occurred since.
One recent example assessed a property offered for sale as being on 247 sqm whilst the actual land holding was 738sqm. For a property worth about $1,100,000, it assessed the value at about $650,000, confused the buyer and disadvantaged the seller. It is common industry knowledge that on almost every occasion these on-line “guestimates” are notoriously conservative even in areas where they have some chance of being reasonably accurate.
I find it odd that property web sites continue to offer a service to buyers that so clearly disadvantages the very sellers that pay them for the right to advertise their property on the same site. The fact that banks are now relying on these guestimates of market value are also leading to unfair lending practices to some borrowers through under-estimation of market prices and the subsequent non-approval of loans.
My advice to buyers is to do your own research, ask local agents for sales evidence and avoid relying on inaccurate assessments of value that are divorced from reality.
by Hayden Groves
REIA Deputy President