The Redfin estimate is a home valuation tool. Built by the brokerage firm, people also know it as an automated valuation model. When people want to calculate the value of their homes, it uses data from multiple listing services (MLSs) to predict the value of a home before it goes on the market.
In this calculation, the most important variable is how much other, similar homes in the area were sold for recently.
What’s the Point?
The intent behind this tool is to offer homeowners a way to decide when to sell. It also provides home buyers with comparative data. However, it’s important to note that the Redfin estimate is not an official appraisal.
Unfortunately, that means the estimate has the potential to be off by thousands of dollars. This is especially true if the listing doesn’t account for unique features or recent renovations.
Here are a few key terms to understand.
- True Market Value: This is how much people are willing to pay for a home.
- Estimated Home Value: This is an approximation of what your home might sell for. It’s based on similar properties that sold recently.
- Asking Price (List Price): This is the amount you set as the homeowner, typically with the advice of an agent.
How Accurate Is a Redfin Estimate?
According to the company, a Redfin estimate has a “median error rate of 3.02% for on-market homes and 8.69% for off-market homes.” Put simply, if you haven’t listed your home yet, your estimate might be off by thousands of dollars.
With an on-market home, the estimate tends to be more accurate. Typically, this is because real estate agents actively add the relevant information about the home. As such, the tool has an easier time guessing the value.
How does this look for the median home sale in the United States?
- Current median price: $368,888
- Off-market estimate range: $353,267-$420,509
- On-market estimate range: $375,204-$398,572
The gap seems quite wide, right?
If you want to sell your home for the median price, your off-market estimate is off by around $35,000. Since that’s just the median error rate, it might be off by way more.
Unfortunately, this means some homes are off by about 3%. However, other homes are off by around 11%.
With this in mind, a Redfin estimate is as helpful as it is harmful. When you want a rough estimate of your home’s value, it’s helpful. On the other hand, an inaccurate estimate misleads sellers and detracts from a positive selling experience.
Redfin launched this tool in 2015. Over the years, the company has made adjustments several times. However, the original error rates were lower in the past than they are now.
Why Is My Redfin Estimate Off?
There are plenty of reasons for a Redfin estimate to be off. Here are a few of the common factors that impact it. When you want to know the value of your home, keep this in mind.
Condo Unit Troubles
When it comes to a high-rise condo, it’s difficult to price accurately without additional information. The algorithm of the estimate has no way to account for your view, for example.
Does the unit face a parking lot or a beautiful downtown scene? This has a great impact on the valuation.
Some cities have a harder time pricing homes than others. This is because the houses in Philadelphia tend to be older than the houses in Orlando.
When you want a Redfin estimate on an older home, it doesn’t take everything into account. This is because the features and conditions of older homes are difficult to predict.
Renovations have a major impact on the value of a home. For example, take a look at this 2021 Cost vs Value Report. According to this information, a mid-range update to a kitchen increases resale value by an average of $45,000.
Oftentimes, off-market listings don’t reflect renovations and repairs. For some savvy homeowners, this is because they try to keep the tax assessor in the dark.
Inaccurate Home Data
In a Redfin estimate, the algorithm doesn’t always have access to essential information. HEre are a few examples.
- Year the home was built
- A fenced yard
- HOA dues
- Attic square footage
All of these have an impact on the price of your home.
In a city like Houston, with a dense population, some streets have a higher value than others. This is true even block to block in some areas. The Redfin estimate pulls data within a certain radius. However, it doesn’t account for specific street values.
Want to Know the Value of Your Home? Get an Answer in a Flash
Too often, homeowners worry that a low Redfin estimate negatively impacts how they sell their homes. When someone believes a property is worth $300,000, even $350,000 makes it feel like they’re overpaying.
If you want to know the value of your home before you list it, call the Houston home buyers at Flash Realty Solutions. Our team has decades of experience in the Houston market and knows how to value a home in its current condition.
Moreover, we make honest cash offers on homes when we buy houses in the Houston area. With a transparent process, we help you understand your options and present an offer you can trust. For a free quote on your home, call our team today.