Even homogeneous markets are best served with personal observation
A couple of weeks ago I ran a posting of recent closed sales in the Ann Arbor market compared to four online-automated valuation models. The variances between actual sales price and these models were extreme even though the houses had adequate exposure to the market. My thought was that the computer systems would have picked up these advertised houses, and given that data, would have been a lot more accurate. It was a surprise to see how flawed the information was.
In order to be fairer to these online sources, I ran it again for a very homogeneous area and included only arm’s length sales that occurred in the past month. I found seven recent sales that are very standard subdivision houses, and compared them to four different online valuation models as well as the assessment values. The list below shows the actual sales price and how each of these models stacked up.
Names have been changed to protect the innocent
- Model A was as close as 1.79% and as far off as -7.02%
- Model B did not hit on two properties but of those that it did it was as close as 9.14% and as far off as -50.98%
- Model C was universally under sales price and as close as -0.19% and as far off as -13.33%
- Model D was universally high and off from 25.35% to as high as 133.61%.
- The State Equalized Values were also off on most of these properties, but to the benefit of the homeowner in that the assessments were lower than sales prices. The smallest difference in price was -10.92% and the largest was -30.59%
What does this mean to you? It means that even in the most homogeneous areas with similar houses and decent sales activity, the valuation models do not stack up with reality for the most part. While some models appear to be better than others are (Model A was closest of the four), it really does not make sense to rely on these databases for a value estimate on your home.
If you are going to list your property, talk to an agent for the correct pricing, or call an appraiser. If you are going through a divorce, dealing with bankruptcy, or need a value for estate planning, talk to a local appraiser. Do not put your trust of this valuable asset in the hands of a computer.
Rachel Massey, SRA www.annarborappraisal.com