Beware of the Big Banks’ Price Estimator Tools

If you’re purchasing a property, you’ve probably seen those ads for property reports and apps from the banks and thought, ‘what a great tool!’. When they promise accurate estimates that help you pay the right price for any property, why wouldn’t you jump at the offer?

Unfortunately, these reports aren’t all they’re cracked up to be. We know that a diligent buyer does a lot of research – but sometimes, a little bit of knowledge is a dangerous thing. 

The problem with free property reports and price estimates

The first red flag with these reports is the wide price variance they offer. It’s not uncommon to see an estimate that gives a low and high end of the price range that vary by hundreds of thousands of dollars. 

The Office of Fair Trading rightly has regulations in place that prohibit price range estimates that exceed a 10% variance. There are several reasons for the rule; however, the most significant is to prevent underquoting and misinforming buyers on their hunt for the perfect property. 

Having a 10% limit ensures any price estimate remains as reasonable and accurate as possible. So, when banks hand out free property reports with big variances, the information can be misleading. 

The other major problem is how the banks are formulating their estimated prices. 

Here’s what the property reports factor in

These free reports are computer-generated, put together by algorithms, leaving out many other all-important aspects of the real estate market. They often only look at the property’s previous sale price, recent sales in the area of ‘comparable’ properties, and a few other things like land value. Many of the comparable sales are quite old, leaving out many more recent sales, including those non-disclosed sales. 

Here’s what they don’t factor in

Unfortunately, a computer’s idea of comparable property is one that’s in the same suburb, has the same number of bedrooms and bathrooms, and has sold within ‘recent times’.

The price estimates aren’t considering the quality of the comparison properties, by closely studying functional floor plans, or aspect and internal light. Not do they consider the desirability of the certain school catchments and services. And never mind any median price changes since those comparable sales occurred, or current market conditions. 

It’s like comparing apples to oranges. 

A three-bedroom property that’s fully renovated on a quiet tree-lined street is always going to be worth more than the unrenovated house around the corner on the main road. But not according to many of these reports.  

Is it ever worth getting a price estimation report from a lender? 

Short answer, not really. If you’re looking to estimate how much you should expect to pay for a property, these bank estimates won’t give you accurate information. 

However, as real estate professionals, we know how important it is to leave no stone unturned during a property search. So, if you’re willing to sift through all of the information in the report and back it up with added research, then it may be helpful. 

You should never rely on these reports alone but should compare the information with multiple sources and look for comparable situations. Always consider the state of the market and put any information you get from these reports into the bigger picture.  

Please don't hesitate to reach out if you want to know more about how banks put these reports together or the process my team and I use to find properties for our clients.