The Problem With Online Valuations

Quicker and free. Sure, but accurate and better?

I’ve been reminded several times recently of the adage: ‘buy cheap buy twice’. It can be true of many aspects of modern life but the same is also true of anything that says it’s ‘free’.

Buying and selling your house can sometimes be not only frustrating, but also expensive and time consuming, so I can understand why people will be drawn to anything that says it can do part of the process quicker and for free. Websites like Rightmove and Zoopla have long offered online valuations for your house, and now estate agents are offering this too, often using the same tools.

So what’s wrong with getting your house valued for free online? You mean apart from being misleading, a data grab, and often ineffective? 

TAKE ME TO YOUR DATA

It might seem a helpful tool that estate agents are offering - convenient, quick and free: get your house valued whilst you’re second screen watching Netflix. But - and I won’t be popular for saying this: the reason more and more agents are offering these tools isn’t necessarily to help you get a rough value of your house, it’s more often to capture your data. They want your name, address, and contact details.

Once they have this information - and sometimes they ask for more too - it will be uploaded to their CRM (Client Relationship Management system), which triggers a sequence of events that the agent probably knows nothing about: automatic emails and text messages, automatic phone call prompts via what they call a ‘nurture’ programme. And with so many agents now using AI, it will probably lead to AI voices calling too.

The idea is that this constant drip-drip-drip of contact with you will convince you that they are the estate agent to use when you come to eventually sell your property. Look - they’ve been in touch so much and are actively taking an interest in selling your house, maybe even telling you they have waiting buyers. In fact, in most cases the estate agent does not actually have a clue what email you have been sent or what text message the system has sent to you.

MISLEADING

Even if you ignore - or don’t care about - having your data taken, used, and maybe even sold or taken if they are hacked, from my own research the prices given can vary so massively as to be almost pointless. Sometimes the bottom value they give can vary as much as £100,000 from the top price. And this is because they will often just give you a price band, so for example: your house is worth between £450,000 - £550,000.  Which most people might already be aware of anyway.

In my experience, in most cases the potential seller rarely believes the lower valuation and will gravitate to the higher figure. (In fact, I’ve written a whole blog about why insisting on a higher price for your house might be a mistake anyway and cost you money!) And this is where the problems can start as the sellers often don't realise they are being totally misled.

KNOCK ON EFFECTS

If people are in a rush or maybe don’t take a second opinion, they could take the higher valuation offer they’ve believed and approach their mortgage lender or their financial advisor, and based on that higher valuation figure (for example, £550,000) they will then work out what their maximum purchase price would be for their onward move. 

So now you’re looking at properties perhaps up to £750,000, and the reality comes in when you finally have your house valued to go on the market and it’s actually valued just below £450,000 - completely changing your plans. 

Your free and time saving tool has now wasted time and your expectations. 

TRUST A HUMAN

So why are these valuation tools so inaccurate at worst, or vague at best? The main data is sourced from Land Registry and that's based on property sales over the last three to four years. Depending on the model that the estate agent is using depends on the different data that they collate in order to give you that online valuation, so there's various different layers that the model will get. Factor in that any that use Land Registry data is also two to three months behind live data.

Regardless of what model the estate agents are using, none of the models will take into consideration several important factors. Here are a few that have impacted valuations of properties I have taken on to the market:

At Holland Walk, they have a lovely seating arrangement at the front of their property with views over open land and the wildlife and its position means they get to watch some glorious sunsets. With pictures to highlight these, the property sold within weeks.

With more people entertaining and relaxing at home, there is a definite demand for outdoor social spaces as well as summer houses and extra rooms for working from home. New Road Upwell has BOTH of these with a stunning outdoor ‘room’ with a brick fireplace, AND a purpose built studio at the rear of the garden with a store and two rooms.

Mill Hill Lane might get a good valuation due to it being set over three floors and with significant square footage, but without visiting you wouldn’t also know that there is significant potential in the detached garage to have an upstairs office or living space.

Here are some other factors that can affect any valuation:

• The condition of the property

• Whether any extensions have been carried out

• Whether your new kitchen cost £20,000 or £50,000

• Whether there is a housing development proposed down the road or around the corner.

• New and improved transport links.

• Neighbours building works.

• Whether you have a really busy road outside that, due to a housing development further down in the village, is now constantly busy.

By failing to take into account these factors, these online tools can seriously misvalue your property. Of course, an actual person might also miss some of these factors too, which is why whilst I’d always recommend getting a human to do your valuation, I’d most recommend Gavin Human.