You may have seen the adverts where a buyer is speaking with an Agent who says one thing, but then buyer smirks as they pull out their phone with a pricing app showing the ‘real’ price, in which they’re depicted to either have dodged a bullet or got a bargain. Wow the app just saved them 100s of thousands, right……no! But first, let’s look at what these apps are and how do they obtain this information.
Put very simply, these pricing apps are based on algorithms, mathematical formulas to best guestimate a home on given information such as suburb growth, averages to similar block size, number bedrooms, bathrooms or any other information that the algorithm can obtain. Overall basic information. And each company that has such an app, can differ hugely in what they use in these algorithms.
It is important to understand the algorithm cannot see the condition of the property or if it was renovated. It does not know the manner the home is presented or what work has been done since the home last sold. There are many important factors these apps simply do not take into consideration.
That is why these apps often have such massive ranges. To suggest a home should sell between $600,000 and $900,000 is not helpful info. Any buyer having spent a day researching could come up with this.
Have you ever read the disclaimer on the apps? If not, please do so. One of the most used apps has wording along this line….this must not be relied upon as a accurate representative of the market sale value. So what is it for you ask?
Basically, it is a marketing piece for that company. Which is fine, but as a buyer (or seller) do not treat these apps as anything more. And as they say themselves, do not rely on it.
Try this experiment. Go to at least 5 different apps with the same property as see what figures come out. I bet you will see a huge difference between apps, especially if the property hasn’t sold for a number of years.
The problem I see with these apps is too many buyers start to rely in them. Look, I get it that some buyers try an use these apps as ‘proof’ of why the home should be $100,000 less, but it is those inexperienced buyers who are missing out because they are basing their decisions on these apps. Again, the companies themselves ask you NOT to, so please don’t.
So, what should you do? Like anything in life, the answer is do the work. Spend the time to look through homes and search for factual information such as actual sale prices. Then compare what these homes actually achieved (recent sales) against what you are looking at.
You also need to be realistic. Just because a knocked around 3 bed home sold for $600,000, doesn’t mean your renovated 3 bedder with a pool should also sell for that too. You need to compare apples with apples and not just on basic information alone, after all, that’s what the apps do.
We met a buyer recently, complaining they keep missing out. When we started chatting, it was clearly evident they were offering well under what the homes should get. And why, because they were relying on an app (the bottom range of the price of course).
Well there’s your problem mister.
Buying homes and selling homes
Written by Shawn Kristofer