Friday, June 09, 2006


Money Magazine Evaluates Online Appraisers

This article by Money magazine tested six of the leading online appraisers on the accuracy of their appraisals. Here's an excerpt:

The market value of a house is what a buyer will pay for it. An accurate estimate comes as close as possible to the market price. Here’s how we compared six popular online appraisers:

  • We contacted real-estate firms around the country and asked for prices for just-closed single-family home sales;
  • We plugged those addresses -- two for each test city (Seattle, Minneapolis-St. Paul, Scottsdale, Ariz., Baltimore, Cincinnati and Portland, Ore.) into each appraisal site to get estimates of values. These cities were chosen to give the AVMs the best possible shot: Zillow.com, the only site that posts its confidence ratings by region, shows these as among its most accurate metro areas.
  • We worked quickly to gather the online estimates before the sales were recorded and picked up by the AVMs. After all, 100% accuracy is no trouble at all for an AVM that has the real sales price. But at least one of the estimates -- RealtyTrac's estimate for the house called "Seattle 2" -- already had incorporated the price of the recent sale.

The results? Electronicappraisal.com, which charges $29.95 for an appraisal, did the best, but none of them did terribly well:

At $29.95 for a report, Electronic Appraiser is not cheap. But it appears you get what you pay for -- a full report with mapped (but not interactive) comparables, a rundown of census data for the county, including contact information for schools, churches and businesses -- and a roughly 50% chance that your estimate is within 5% of the likely sales price. Being right just half the time might get a human appraiser fired. Yet, in the world of online AVMs, this is top performance.

The article didn't test certified appraisers or realtors on their predictive skills, but a certified appraiser in the article implied that appraisers expect their predictions to be within 5% of the final sales price.

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FSBO property owners are well served to use a service like this one or some of the free ones as well. However they must remember that it is still no substitute for a certified appraisal.
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