under contract for $435,000 and the comps that the appraiser chose were 2 or more miles away, which is outside of the normal appraisal guidelines. We had to write up a long explanation about why the appraiser had to choose these comps and could not use homes that were closer in distance. You cannot use a rancher built in 1968 to value a colonial built in 2003, but you can choose a home that is farther away that is built within 5 years newer or older. Online systems may use comps from those lower priced neighborhoods in your online estimate. The system doesn't understand the makeup of the area and simply pulls prices from a broader geographic area, with the arrived-upon price potentially being far below what it should have been. These online sites can be worthwhile for obtaining comps of area sales, but they may not be very accurate overall.
EXAMPLE OF DIFFERING HOME VALUATIONS
A buyer is interested in a home listed at $520,000. The online valuation determines the house is worth $540,000. Based on that estimate, the buyer offers the asking price with no appraisal contingency (meaning they will purchase the home at the sales price, regardless of how much the appraisal comes in). When a professional appraisal comes in at $500,000, and the existing tax records assess the home at $400,000, the buyer wonders why the values are so different and whether he overpaid. The house was listed at $520,000 because at that price, the home would sell in a reasonable amount of time. Why would the appraised value not be whatever a buyer was willing to pay? The fact that they offered $520,000 does not mean that is the true value of the home. Certain factors may weigh in - undesirable businesses located near the property, for example. Online valuations cannot take into consideration the condition of the
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