Understanding the true market value of a property is one of the most important things you will need to do as an investor. Before you can make an offer or buy a deal you must know what it is worth. The best way to start your research in determining market value is getting recent sale information of comparable properties in the same area. We frequently refer to these as “comps�.
You need to be very careful using on-line estimates for what homes are worth. They are interesting to look at but NEVER make any purchase or sale decisions based on these values.
Online home-value sites offer some useful tools, but their estimates are often wrong.
“The percentage of error on these estimates is still very large,” says Delores Conway, director of the Casden Forecast at the University of Southern California Lusk Center for Real Estate. If there are not many comparable sales in one area, for example, she says, “the estimates will have huge errors in them.”
Zillow.com and Cyberhomes.com rely on computer-generated automated models to estimate values. The models help compensate for the fact that many neighborhoods don’t have enough sales to generate accurate values based on experience.
But these computer models don’t reflect home condition, improvements and may not even accurately convey property descriptions.
Marty Frame, general manager of Cyberhomes.com, says the data on the site is best used as a way to form an overall impression of a neighborhood.
“Our goal is to provide you all this information and let you cherry-pick the things that are most interesting to you,” Frame says. “You’re going to look at an estimate and say, “that makes sense’ or ‘that doesn’t make any sense.”‘
Source: The Associated Press (06/23/2008)
Posted by Carter Brown
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