When you are purchasing a house, you definitely wouldn’t want to overpay. So, you decided to check the online property valuation. But is this type of valuation reliable, or should you see a professional appraiser?
Is Online Property Valuation Reliable?
Before going into the main topic, you should know who determines the property value.
Banks or Lenders
When a person applies for a home loan, a lender hires an appraiser to determine the value of that house. Because when the banks or lenders grant a property loan, automatically, they get a stake in that property. That’s why they need to know what is the actual value of the property.
The lender can use this property valuation during a foreclosure to get their money back.
For tax purposes, a tax assessor determines the property valuation and reports it to the government. Depending on the property’s valuation, the government will set the tax. In some states, it is done yearly, and in others, it is done every five years or more. For example, properties are assessed every five years in Idaho, conducted by the County Assessor’s Office.
Real Estate Agent
Apart from the banks and govt. tax assessors, real estate agents can also help determine the property’s value. To determine the property’s value, a real estate agent will do a market analysis and analyze the recent property sales.
3 Reasons Why You Shouldn’t Trust Online Property Valuation
1. Used for Drawing Eyeballs
Most online property valuation websites use almost similar data that an appraiser uses. However, they present the information on their website differently. Sometimes they intentionally inflate the property’s value to attract eyeballs to their platform. Their main goal is to get as many leads as possible and use them for marketing and selling purposes.
2. AVMs don’t Consider House Conditions.
While determining the value of a property, the condition of the house plays a crucial role. But AVMs or Automated Valuation Models don’t consider the house condition. Instead, they generalize the whole part and set property valuation. But this can be very deceptive.
For example, one house can be close to a creek, which causes regular flooding. On the other hand, other places in that area are situated on the high ground and don’t have the risk of frequent flooding. Here, AVM will put all the houses in that area on the same page and determine property value based on the average conditions of the places in an area.
However, some online platforms allow homeowners to update their home improvements and repairs. But still, these online platforms cannot monitor how a house is maintained.
3. AVMs don’t
When a house is in distressed condition or has foreclosure, the value of that house drops drastically. That’s why during an appraisal, real estate agents or government appraisers don’t consider the distressed house. But AVMs cannot differentiate between a distressed property and a regular home. As a result, AVMs fail to show the actual property value.
To know about the accurate value of a property, you should take help from a real estate agent. Also, if possible, you can hire an appraiser to figure out the property’s value.