What's Your Home Worth? Well, See For Yourself

For the past five years, Redfin has sought to build the perfect site for folks to preview, visit and ultimately buy homes for sale. But in 2012, we have opened a second major front, to serve owners and sellers of homes.

In just the past three months, Redfin launched Home Report, a personalized monthly email monitoring sales near your home, and Open Book, a reviews site for Redfin’s trusted real estate partners that will one day include handymen, general contractors and stagers. Not coincidentally, our listing business has shot up 81% year over year and we expect it grow even faster as we add more agents focused on listings, and provide better exposure for our listings on our own site.

The most important initiative on that front just became available on Redfin.com this morning: the revolutionary, beautiful Home Price Tool, which gives you as the customer the same information used by real estate agents to develop a comparative market analysis. Our hope is that you will be able to price homes more accurately and with greater confidence than ever before, in an open process that can involve your spouse or real estate agent.

For any home, the new online tool automatically assembles a list of potentially comparable recent sales, drawn directly from the Multiple Listing Service (MLS) databases used by agents to record sales. By reviewing pictures of each home sold, you as the customer can decide which are actually comparable, adding and removing sales to and from the list.

The Home Price Tool then calculates a likely price range for the home you want to buy or sell, allowing you to share your analysis with your mom, your Redfin agent, even with the other side in a negotiation. We just posted a YouTube video to guide customers through the entire process.

Sometimes, the price range will be broad, because the home in question is one of a kind. Other times, especially when the home is part of a larger development, the price range will be narrow. If your house includes, as mine someday will, a giant ping-pong pleasure dome, the comparables will be sparse and the price range will be very broad. This isn’t a limitation of the Home Price Tool; it is a limitation of life itself, and one serious buyers and sellers can’t ignore. You have to buy the ping-pong pleasure dome on faith.

We do not pretend that Redfin’s valuation tool is as simple or as immediately gratifying as seeing a price-tag on every property in America, a feature that Zillow has long had, and which Trulia — by some freak coincidence — also launched today.

Zestimates, restimates and testimates are popular and cool, and will always be included in our site for fun, but it’s a way we at Redfin can never go as real estate agents. Our goal is to be credible and transparent rather than provocative or easy, explaining exactly when our pricing is likely to be accurate and well-informed — and when it isn’t. If we think a home is worth $300,000 instead of $350,000, we should we be able to say exactly why, using the same Home Price Tool to show our work to our client.

Since we have a fiduciary responsibility as agents to get it right, we can’t embrace a purely algorithmic approach to pricing. A computer using a secret formula to price your home doesn’t have eyes and so it can’t see that one property looks nothing like another. You can say what you like about its estimate but you can’t really see what it’s thinking.

The truth is that pricing a home is not a science reserved for the high priests of mathematics. If you’ve walked through all the houses in the neighborhood and noticed what each sold for, you can price a home far more accurately than a computer simply because you have much, much better information.

This is the experience Redfin has tried to bring to the web, because in fact we have much, much better information. Only real estate agents have full and complete access to the local MLSs agents use to list properties and record sales. And only Redfin has incorporated that sales data, with all the pictures used to market the property, into an online tool for pricing a home.

Whereas public records takes weeks and usually months to record a sale, we know within 15 – 30 minutes of the property going off market what it looks like and how much it sold for. That we even have this information is because of a seismic turn of events in 2008, when the National Association of Realtors and the Department of Justice agreed that a real estate agent can publish any information on the web that she can share in person with her customers.

It took the MLSs a year or two to share all the data, and then Redfin a year or two more to incorporate that data from each MLS, but now that we’ve done it, customers on the web have access to the same prices and pictures that agents do, and we can all work together in a more informed way. Revolutions sometimes occur so slowly they hardly seem like revolutions, but this is exactly what the Home Pricing Tool is.

Over the coming years, we will work just as hard on perfecting the experience of pricing a home as we have at previewing listings. For now, take the Home Price Tool  for a spin and see what your home might be worth!

Discussion

  • Dave

    It seems curious that the tool doesn't take into account lot size or foreclosure status in its price adjustments. For my house, it knocked off $3k for a 19 sq. ft. house size difference, but didn't seem to care that the comp was on a lot ~8000 feet smaller, and was an REO…

    • http://blog.redfin.com/ GlennKelman

      Well part of our point is that no tool can automatically account for every possible difference between two homes, which is why we ask each user to choose which properties are comparable and which aren't. A home with a smaller lot, being sold by a bank, is probably not a comparable, and you should just eliminate it. 

      • Tom Meyer

        Maybe a better term than Comparable is “Relevant”. The bank owned is relevant because it factors into the mind of the consumer. I can get an appraisal to show a home appraises for $350,000 but if there are REO and distressed sales of homes in the neighborhood for $275,000, the $75,000 gap will be one few buyers are willing to extend to.

  • Pheditor

    Agree with the lot size factor and obviously no tool can account for view, privacy, quality of neighborhood.

    • http://blog.redfin.com/ GlennKelman

      Exactly! That's where you come in, and that's why the tool is interactive.

  • Jrh0

    But I'm dismayed that the tool and Zestimates don't seem to take waterfront into consideration.

    • http://blog.redfin.com/ GlennKelman

      The initial set of comparable properties is just a starting point. It's up to you to choose the ones that are truly comparable. Any waterfront home is only comparable to other waterfront homes…

    • Toffer_Lloyd

       Since Zillow uses the sales history of a home as a major factor of its Zestimate, as long as a home is not a new construction it by definition would take waterfront into consideration (since previous buyers have).

  • Pete Flint

    Hi Glenn, congrats on the launch – another nice addition to the site.
    Thanks for the shout out on Trulia Estimates… bizarre timing I know!!
    Let us know when you want to start publishing Trulia Estimates next to your other estimates on Redfin..

    • http://blog.redfin.com/ GlennKelman

      Let's do it Pete. We're crazy with all sorts of R&D projects, but we'd love to add in Trulia Estimates as soon as we can. 

  • Jason L

    Glenn, this is an excellent tool, but I have noticed one problem.  It uses the MLS-listed square-footage values of homes, which are not always honest.  Many home sellers will inaccurately represent their basement as taxable square footage.  The home I'm under contract on has a 1200 sqft finished basement and they're calling it a 3700 sqft house.  It isn't; it's a 2500 sqft house with a large (wonderful) finished basement.  As a result the appraisal tool is telling me it's worth more than 100k more than it actually should be.  Is it possible to write the tool to pull from the state tax assessed square footage rather than the MLS listing?

    • Klaus

       Hey Jason –

      As an agent, we run into that all the time when pricing homes. Again this is where the human element and legwork come into play. Usually you can surmise that info by scrolling through photos, reading the marketing remarks or comparing the tax records on the Redfin listing page for each home, since we supply all that info. Then add/remove/adjust as needed.

      • Jason L

         Yep, that's what I did.  What I don't know is how to accurately value a finished basement, fully fenced yard, etc.  'Real' square footage is easy.  I've been basing value estimates on just the above ground part of the house.

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  • http://profile.yahoo.com/R75LUAQYNLKLZPJQBNDC256Z7Q Gary

    My home is listed as 1000 sq ft but it is really 1960 sq ft, but there is no way to make adjustments to your home size to improve the suggested comps.  What this means is I would have to find comps by hand, which I could do without the tool.  Great idea though, I hope you fix this issue.

    • Robert Gay

      Hi Gary,

      Robert from the dev team at Redfin here. That feature was in the initial plan for the tool, but we didn't get to it in time for the release of the initial version. Since launch we've gotten a lot of feedback both from users on the site and from our own agents requesting this, so rest assured it's coming down the pipe – hopefully very soon!

      • Marshall Gordon

        The “comparables” are ridiculous. A bombed out foreclosure with no kitchen, no bathrooms, and no roof on the guest house should not be included because it is close by and has the same sq footage. That's like pricing a mint used Cadillac against a crashed Lexus with water damage and a salvage title.

        Using a range in sold prices picked based on that kind of inadequate criteria and then taking the simple arithmetic average price is absurd.

        This tool is worthless, even as a “starting point.”

        • Marshall Gordon

          And another thing: You need to do some software testing. This is copied from your tool. The adjustment for square footage is equal to the price the home sold at. Pretty bad. And sad. Ever hear of quality assurance?

          Quick Map View Photos
          1935 South CAMINO MONTE
          Palm Springs, CA 92264  (0.04mi.)
          Beds 2 -1
          Baths 2 -1
          Sq.Ft. 1,500 -1505
          Lot size 14,810 -10890
          Yr. built 1959 44 earlier
          Notes:

          Comparable Price:
          Last sale (09/21/11, $533/Sq.Ft.) $800K
          Price Adjustment for Sq.Ft.
          $802K
          $1,602K
          Remove Comparable
          Adjust Price

      • http://profile.yahoo.com/R75LUAQYNLKLZPJQBNDC256Z7Q Gary

        Great news Robert, thanks for the response!

  • http://www.realestatesearchvirginia.com/ home for sale in richmond va

    It's a nice suggestion to hire a actual estate agent who knows the home purchasing process & can guide you to the home that fits your criteria.

  • http://www.millionairepropertymakers.com.au/ Perth property investment

    Wow! Very interesting post!

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  • Guest

    This tool is awesome! I priced my condo at 10% above what I paid for it. Sweet!

  • http://twitter.com/bigREdata Dave P

    Looks pretty cool. Big Data will hopefully help change the way we buy and sell. I think tools like Redfin’s are only the beginning and i look forward to seeing what else they come up with. here’s my crack at giving the data to the public….if anyone cares: 
    http://bigrealestatedata.com/blog/customer-dashboard/

  • Jen Anderson

    After using this tool the past few weeks to help me put together quick CMAs, I am very pleased. I can quickly eliminate homes that are not comparable and even email a link to others. Keep up the great work Redfin!