Online Valuations Are Not Enough

Dated: 07/10/2018

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Today consumers have numerous resources for getting online home valuation estimates. These are helpful when considering refinancing a home, applying for a home equity line, determining whether or not you should appeal a tax assessment, and more. 

When it comes to pricing your home to sell, there are better options.

There are a lot of factors involved in developing an accurate property valuation that cannot be parsed by a computer. Consequently, these tools should not be used for setting a price when you sell your home or for determining the correct value when you buy a home. Here are the reasons why:

More than numbers

  • We have good computer models, but they can not replace an appraiser or a competent broker. A home valuation is likely to always be art mixed with science. As of now, computer-generated estimates more often than not miss the mark by 5% to as much as 50%

  • To maximize a seller’s return on investment, other key factors, not measured by the numbers in automated valuations, are extremely important.

    • Computers cannot do an on-site walk-through and offer a personal evaluation of a property. Without this, one of the biggest inputs in creating an accurate estimate is missing. The computer has not seen the home. The computer has not seen the neighborhood. The computer does not know the market. A physical inspection of the home, plus direct market knowledge, are mandatory for correct pricing. Specific neighborhood experience is even better - from how homes are selling to why homes are selling in that location.

The input problem

  • Some of the automated programs out there incorporate publicly accessible information beyond just listing and sales data; so, even how recently a property was assessed can impact the figures generated by an automated process.

    • Tax assessments are snapshots of estimated valuations that are typically updated every 5 to 10 years. Even when current, they are rarely accurate to the degree needed for market pricing because they are intended for taxing – not for selling. Plus, different municipalities use different systems for pricing so automated estimates that apply these values are inconsistent.

  • There are many different unique features of a property that can’t be detected automatically

  • Programming how to select the best comparable properties has serious limitations. For example, an online value estimation may be set up to pull in a minimum of five properties sold within the past three months that are all within the same neighborhood in order to develop a comparable valuation estimate. But, because only two properties have sold within that timeframe in the same neighborhood, the programming tells the computer to extend the time frame of the search and/or distance to get to the five sold properties minimum for the calculation.  Unfortunately, this will skew the estimate, likely making it inaccurate.

    • A human working on the valuation is able to interpret the data to build a clear picture of market value rather than simply accepting best guess comps within a given radius and time frame. Especially in a place like Charleston, where properties vary dramatically within a short distance, this is important.


  • Of course, the most important thing in real estate is location. How can a computer measure the value of location within a neighborhood? It can not.

    • Consider the value difference between a home near a busy road or noisy business area versus the same home that is located on a quiet cul-de-sac.

    • How near a home is to the community center or other amenities impacts value (for example, boat landing proximity is very important in pricing in some Mt Pleasant area neighborhoods).

    • Lots have different values because of their size, view, and type. Waterfront lots, corner lots, cul-de-sac lots, golf course lots, and standard lots – all have different valuations from one another when located in the same neighborhood. Few computer models measure these differences.

  • In the Lowcountry, you may live in a neighborhood where some of the homes require flood insurance and others do not.

    • In my own neighborhood for example, 40% of the homes require flood insurance but 60% do not. Whether or not a home requires flood insurance impacts valuation in a way that is not measured by automated systems today. With the added cost of flood insurance, and the potential for that cost to skyrocket in the future, a home in an X zone normally has a pricing advantage over a home in an AE zone in the same neighborhood.

Services and taxes

  • Homes may be near one another yet may not have the same access to services.

    • For instance, there are a few neighborhoods within the Charleston region that are split between counties. This results in variability in services along with service cost differences. You may pay a monthly fee to a garbage collection service in one area of the neighborhood and have a neighbor whose service is “free” because it is already included in the taxes they pay. This also means that property taxes will be different across that neighborhood line as well. 


  • Neighborhoods may be split between school districts. Buyers with children often have a strong preference about where their children go to school. Whether your home is located in the Charleston County School District, the Berkeley County School District, or the Dorchester County School District can impact valuation. Online valuations do not take this into account.

Construction variability

  • Online valuation programs may not factor in construction changes across a neighborhood that could have an impact on valuations.

    • It is common for notable changes in construction to occur across a neighborhood as builders make alterations to plans from phase to phase. This may include changes in ceiling height, choice of materials, landscaping, and other changes.

      • In a neighborhood in Hanahan, the builder changed from all-electric homes in Phase I to homes with gas in Phase II – but kept the same 7-floor plans. Buyers typically prefer gas to all electric. So, a plan in the second phase may have a higher market value than the same plan in the first phase.

      • The same builder in a different neighborhood changed the ceiling height on two single-story models, increasing the height from 9-foot ceilings to 12-foot ceilings within the same neighborhood. The higher ceiling homes were more appealing to buyers, selling for more as a result.

    • Not all homes with the same floor plan look the same from the outside.

      • To increase the appeal of a neighborhood, builders add variety.

        • A cost-effective way to do this is to use a variety of fronts on the same floor plan. Each different look is called an "elevation". Some elevations are more expensive than others. In a modestly priced neighborhood, a $2000 to $10,000 price range based on elevation selection is not unusual. Elevations have less impact on resale valuations than on new home pricing, but the value differences are not inconsequential. For example, if you choose a brick front elevation with a full front porch, your home will probably be worth more than a neighbor’s home with the same plan but a less expensive vinyl sided front with no porch.

    •  Even whether the home has a pool or a workshop is ignored in automated valuations. Realtors do not ignore pools, which may add or detract from valuations. 


  • The more unique a home is, the more difficult it is to evaluate market value. While computer models focus on price per square foot and few other factors, a good agent studying a property will consider everything from style, to functionality, to maintenance, and even to cleanliness.

  • The more custom the home, the more unique that home. Consequently, online valuations perform with decreasing accuracy directly with increasing price. 

Home improvements

  • Computers cannot see many of the improvements homeowners make that change the value. 

  • They do not give weight to landscaping or aesthetic improvements. They don’t factor in new paint, new carpeting or whether not you recently renovated the master bathroom to add a fabulous new shower.

  • Does the home have outdated carpeting? Are there solid surface countertops - or does the home need an entire kitchen renovation? What is the condition of each appliance? Have the pets damaged doors or baseboards? Are there insect infestations? What is the condition of the roof? What is the age of the HVAC?

Remote and rural properties

  • Rural properties are even harder for computers to handle well. The more isolated a property from other properties that are similar, the more challenging the valuation. Homes located in rural areas are often very different from homes nearby. Unlike homes built in a subdivision, was similar construction dates, consistent code compliance, and perhaps even the same builder, many properties are so unique they render computer valuations somewhere between moderately inaccurate to completely useless.

Market analysis

  • Currently, in the Charleston market with rising home prices and strong demand, sellers have the upper hand. Computer valuations may attempt some rudimentary market condition analysis, and apply that to prices, but they do not do it well.  Agents are far better at interpreting market conditions on the hyper-local basis needed for accurate home valuations.

  • Computers look at raw data but fail to factor in trends with any reasonable accuracy. Market conditions change quickly. And, in diverse markets like Charleston, market variability is significant even within smaller geographic segments, such as Mount Pleasant or Johns Island. A competent Realtor working in the area knows the trends and considers trends when making value recommendations.

A home valuation is not enough for proper pricing to sell

  • A home valuation estimate is only the beginning. Even knowing the perfect fair market value of a property does not solve the pricing question completely. Why? Because sellers have motivations in selling that impact pricing. For sellers, the fair market value is very important but imperfect for pricing decisions.

  • A sellers’ motivation to sell is exceptionally important. How fast must the sellers sell to meet their goals? How willing are they to negotiate? Will they be willing to make improvements to the property? What concessions will they make to get the home sold? These things are not just important for the bottom line in a sale, they are also important on the front end when pricing is considered. Computers offer no guidance, but agents can.

The bottom line is that online computer-generated valuations, while they have their degree of usefulness, have huge limitations. Professional Realtors and professional appraisers are much more likely to arrive at an accurate market valuation.

And, when applying a market valuation of a home in setting the offer price, using a professional who knows the market well and understands your needs and motivations is simply smart. When pricing your highly valuable asset to sell on the open market, using an online valuation as the basis for pricing is not much better than a roll of the dice, an opinion of a neighbor, or a simple best guess.

When you are ready to find out more about what your home is actually worth, call me.  It will be my pleasure to stop by. I will offer my opinion after a careful review, including an on-site, in person, analysis. That way, you can feel confident that you know exactly what your home is worth today. 


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Chris DeLoach

SERVING CHARLESTON, SOUTH CAROLINA BUYERS AND SELLERS SINCE 2001 ------------------------------------------------------------------------------------ Buying a home – or selling a home – can be one....

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