Property value estimates – can you trust the online evaluation?
Having an accurate understanding of the property's value is crucial. Photo: Getty
When it comes to buying and selling, finding out what your home is worth is tricky business.
Nearly one-quarter of Australians – 23 per cent – check the value of their property every three months, according to a recent HSBC study, with many of them jumping online to find a value estimate which, nowadays, can be done within seconds.
But estimates can vary greatly depending which provider is used. To get a sense of just how much they can differ, The New Daily compared the estimated prices of a house in Melbourne and an apartment in Sydney.
The three-bedroom, two-bathroom house in Melbourne’s Fitzroy was estimated at between $981,000 and $2.019 million depending on which site was used.
The top valuation on this house was more than double the lower price range. Photo: Nelson Alexander
Likewise, the price for the two-bedroom, two-bathroom apartment in the heart of Redfern in Sydney, ranged from $525,000 to $1.065 million.
Each estimation provider uses a different methodology to work out the value, based on data collected when the house was previously rented or sold.
This Redfern apartment had huge price variation. Photo: Domain
“It’s very complex. If you put in your own address, that’s matched against a lot of criteria,” CoreLogic head of real estate Geoff White said.
“For instance, if you put on 123 Smith Street, Collingwood, our data will know the type of the property, how many bathrooms, bedrooms, car parks it’s got, the land size, and it then matches comparable sales.”
Not only do the sites use data from governments and estate agents, but they also compare recent sales in the area.
“It’ll be compared with data from houses which were recently sold because the market isn’t what it was three months ago. In most cases, it’s a very good estimate.” Mr White said.
Greg Sugars, the CEO of national property valuation company, Preston Rowe Paterson, says that the calculations work when you’re comparing like for like. But if you’re looking at something different to what else is in the area, you want to take them with a grain of salt.
“They work really well in homogenous areas where there are lots of sales,” he told The New Daily.
“But anywhere you’re looking at a property outside the norm, it won’t work.
“If you’re looking in Cranbourne and every house is a two-bedroom, and you’re selling a five-bedroom it doesn’t work.”
The cost of an on-site property valuation – between $300 and $1000 depending on the location – is what holds many people back from getting one, Mr Sugars said.
“Not many people will pay for an independent valuation because they’re quite expensive, and a lot of people don’t trust real estate agents so they think ‘OK, there’s some data to get an idea’ [of the property’s value].”
What it won’t tell you
A statistical model can never physically inspect a property, so it doesn’t know if it has been recently renovated, fitted with golden doorknobs or covered in stained, shaggy carpet.
The fact that it misses these nuances, is the sole reason cited by Herron Todd White managing director Gavin Hulcombe why online estimates fall flat.
“People need to recognise they’re statistically generated and people haven’t walked through the property,” he told The New Daily.
“Whether it’s things like kitchen renovations or colour schemes – these things can influence values, but they’re not always evident in some of those estimates.”
And while some estimates can tell you how confident they are in the price, Mr White says nothing will ever be as accurate as a walk through.
“I think the thing is, it’s a guide. It’s based on some pretty good methodology,” he said.
“If a potential seller is looking at getting an estimate, do the automated evaluation, but I’d also have someone walk through it to more accurately determine the price.”