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One of the first things a potential buyer does when looking at a property is check price estimates online, but depending on the provider, these can vary from tens to hundreds of thousands of dollars.
The estimated price of one Lower Hutt property currently on the market differed $690,000 between the provider with the highest estimated market price and the lowest.
Each price estimate supplier has its own method of calculation.
Stuff looked at four of the most popular – CoreLogic, Valocity, QV and Homes.co.nz – and put their automated estimates to the test on four properties for sale now from around the country.
READ MORE: * Homes.co.nz criticised for allowing estate agents to influence price estimates * First Home Loan scheme changes: What can you get for the new price caps? * Wellington's $10,000 houses: Where land value outweighs home value
QV began as the Government’s valuation department in 1896 to provide estimates for tax purposes – and it still does this, supplying valuations to 88 per cent of councils.
In 2005, QV became a crown-owned company, and now produces estimates of residential properties for free online.
Spokesman Simon Petersen said these estimates were based on a combination of property data and recent sales.
“Our real-time value estimates replicate how a registered valuer would go about assessing the value of the property, using an algorithm and not purely by using inputted property data attributes to calculate the value,” he said.
With so many councils (including Auckland, Wellington, and Christchurch) using QV for triennial valuations, Petersen said QV had a lot of data to draw on.
Valocity’s head of valuation James Wilson said the company’s automated valuation modelsused algorithms that compared a property with a selection of similar, recent similar sales.
“The models select and adjust multiple recent sales based on a range of factors including the floor area and the property type, location, the number of bedrooms, and the date of sale,” Wilson said.
Other factors included cladding type, and the age of the property. The models also supplied a confidence level rating, which usually depended on how common or atypical a property was.
Wilson said it was important estimates were based on independent computer models and for that reason the company didn’t use any external parties – including real estate agents or registered valuers – as input into its values.
Popular website Homes.co.nz has been criticised recently for allowing real estate agents to influence its HomesEstimate without telling potential buyers when it had happened.
Homes.co.nz chief data scientist Tom Lintern said the inclusion of this information was being discussed, but no decision had been made on how this could be achieved.
He said about 3per cent of listings received input from an agent.
Homes.co.nz describes its HomesEstimate as being calculated from public data, registered valuer's valuations, and real estate agent current market appraisals.
CoreLogic NZ country manager Simone Moors said the company estimated the values for about 95 per cent of all residential property every week.
A point of distinction was the company maintained a team in Wellington tasked with data quality and maintenance, she said.
“Both on-the-market prices and sold prices are used in the modelling process to assess the estimated market value of a particular property.” she said.
“The attributes selected in the [auto valuation models] relate to the characteristics of properties themselves, for example bedrooms and bathrooms, and the location of the property, for example zoning, land use, street types, latitude and longitude.”
The model was designed to select the factors that best predicted the market value of a property.
CoreLogic also maintain a confidence rating.
This five-bedroom, two-bathroom, 171-square-metre property is located in Korokoro, Lower Hutt, and show just how different estimates can be.
Homes.co.nz: $1.73 million (This estimate had stood at $1.24m before an agent’s appraisal increased the HomesEstimate)
CoreLogic: $1.13m (with a medium to high confidence level)
Valocity: $1.12m (Medium-high confidence)
Next up is this four-bedroom, one-bathroom villa in the Auckland suburb of Sandringham.
Homes.co.nz: $2.92m. (This estimate had been $2.69m before an agent’s current market appraisal increased the HomesEstimate)
CoreLogic: $2.72m (with a low confidence level)
Valocity: 2.72m (with a medium confidence level)
Next up we have this two-bedroom, one-bathroom brick bungalow in Redwoodtown in Marlborough.
Homes.co.nz: $460,000 (this estimate had been $537,000 before being reduced by an agent’s appraisal)
CoreLogic: $510,000 (with a medium to high confidence)
Valocity: $490,000 (high confidence)
This one-bedroom, one-bathroom, 40-square-metre property in Kaitaia sits on 1.58 hectaresof land.
Homes.co.nz: $475,000 (had been $260,000 before an agent’s current market appraisal increased the HomesEstimate)
QV: No estimate available (as the property was classed as a lifestyle property, not residential.)
CoreLogic: No estimate available due to lack of information on the property or similar properties in the area.
Valocity: $270,000 (Low confidence)
Matt Wafer of Auckand real estate agency Wallace & Strattonsays CoreLogic is his go-to for estimates.
“I use this as it is a more involved and thorough process in terms of calculating valuations. As an example I am able to pick the comparable properties I want to use in the calculations,” he said.
Wafer said with most estimators being free, they helped buyers get a feel for the market.
“However, be wary of the accuracy behind the numbers. I would personally not take these calculations as matter of fact.
“I believe it is always better to get an experienced professional to come through and value your home if you are looking to make any serious decisions.”
Professionals real estate agent Shane Brockelbank is selling the Korokoro home in the above comparison.
He takes a dim view of automatic valuations, and says no providers can give a realistic estimate without having someone visit the home.
He did not recommend any service to clients, and said he cautioned buyers and sellers, because seeing an estimate that’s high could put buyers off making offers, making it sell for less.
On the other hand, low-ball estimates could devalue a property in buyers’ eyes, he said.
He said price estimates were useful for tracking market trends, but not for pricing individual properties.
Rod Schubert, managing director of Rod Schubert Financial Advice, also used CoreLogic, and said it provided useful data when providing information to clients and preparing bank applications.
“They have realistic estimates in most cases and refer to recent comparative sales in the area,” he said.
However, no automated valuations could not account for property characteristics like renovations, the specification of materials used on the interiors, or uniqueness.