How much is my home worth? What’s your home worth? Get an instant valuation on your house now.
Customers visiting some property portals and some estate agency sites are likely to be faced with an offer of an instant valuation of how much their house is worth.
In many ways, this seems like the type of offer that is just too good to turn down. In a matter of seconds you can find out how much your property could be worth. That can help you decide whether or not you will sell it, whether you can move .... and even whether that ‘dream home’ is within your reach.
But let’s take a look at the ins and outs of these instant valuations.
First, how do instant valuations work ?
Instant online valuations are a type of automated valuation tool. Generally they use a computer algorithm to work out an estimated valuation of the property in question.
The creators of these algorithms are usually quite cagey about what data the algorithm uses and like to regard it as something of a trade secret. It is likely to be drawn from several different databases. It likely to be heavily based around recent selling prices for similar sized properties in the area, national price trends and forecasts, local price trends and forecasts, plus other information on the market.
What are the pros of instant valuations ?
They are certainly thought to be good for generating seller interest and motivating sellers to consider putting their house on the market. They work on the curiosity factor, and in times when instant gratification is a big draw they deliver a valuation immediately.
Instant valuations may even be fairly accurate .... sometimes.
What are the downsides of instant valuations ?
The major downside to automated valuations is accuracy. In some circumstances they can be extremely inaccurate.
Firstly, the data they draw on is not real time. Actual selling price comparables for example may be weeks or months behind. That can be a particular problem in a fast rising or falling market. The estimate is only as good as the data used too.
Secondly, automated valuations can’t possibly take account of every factor that influences the value of a property. For example, its condition, exact location, demand in that particular local market, the volume of sales or the sentiment of buyers and sellers.
Instant valuations may potentially play a part in influencing or even distorting actual market values too by influencing buyer and seller expectations.
It’s not usually clear whether an automated valuation is a suggested asking price or a likely selling price either.
So are instant house valuations any good ?
Instant automated valuations are most likely a useful tool in generating seller interest and gaining leads for further enquiries and in-person valuations.
Faced with a choice between getting an instant figure for a property’s value and waiting several days for an in-person valuation it’s easy to see which a prospective seller is likely to try first. Prospective house buyers and sellers tend to be particularly active in the evenings and weekends, when ‘human’ valuers are less likely to be available, and this is when instant valuations are most likely to prove attractive.
Then again, they can be a double-edged sword: An estate agent who values a house in person for significantly more than an automated valuation is likely to be in pole position to get the instruction. An estate agent who values it in all honestly for much less is likely to face a struggle.
So instant automated valuations probably have a function, as long as the downsides are considered, in keeping the market moving and generating enquiries.
They’re not any good for estimating actual asking and actual selling prices full stop. That’s something that only an in-person valuation can do. Although this hasn’t always been the case most agents and portals who use them are now quick to make a distinction.
Lastly, one interesting point to consider is that instant automated valuations could potentially get a lot better in the future. As with every kind of tech. nowadays the algorithms they use and the data they draw on are being developed all the time. The real potential of artificial intelligence or AI has probably yet to be fully realised.
It would take a brave person to say that, one day, instant valuations will become so accurate that they will put estate agents and valuers out of work. But, given the rapid pace of developments in technology .... who knows?