With the profusion of internet sites devoted to real estate, I think it’s important to understand their real usefulness for the general public. For almost anyone who has ever navigated a real estate transaction, whether your net worth is half a billion dollars or five thousand dollars, the transaction most likely represents one of the largest transactions you will likely encounter in your lifetime.

The internet sites, for the most part, garner information from agent posts, private individuals and public record sites to provide information to the general public. Think of Zillow, Trulia and the other sites as the Facebook of Real Estate.

Anyone can post their property on these sites and include photos. There is no verification by these sites that the content of the posting is accurate, except for possibly the location of the property. These sites are therefore helpful in finding potential properties that may be for sale, but not much else. These sites are a marketing tool to get property noticed by someone searching on the internet for property, but they aren’t really good for establishing value or verifying information.

Most of these sites provide a “market value” for the property. As you are probably aware, market value is more involved than simply clicking a button and allowing a site to provide you with a value based upon automated formulas contained in the site. Appraisers typically take up to a week to arrive at market value. Their investigation includes choosing the most appropriate comparables for the subject property and adjusting those comparables to reach a market value for a particular property on a particular date.

The inherent flaw in the market valuation process is that it uses historical data to forecast present or future valuation. In other words, we are using information from properties that sold up to a year ago to forecast what the present value is of another piece of real estate. It rarely indicates the present value of a property in an accelerating or decelerating market. Arriving at market value through automated formulas, is therefore a really ineffective way of determining value. When you see a Zestimate, understand that it is the result of a mathematical equation, not really an indication of market value.

In one instance, I found two Zestimates for the same property that were $1 million dollars apart. Obviously, there was some glitch in the system that provides the information to the site, but it is indicative of how the value can be influenced by using an automated system to arrive at property value.

It is important to understand the real effectiveness of the public real estate sites. Your best ally in any real estate transaction is a competent real estate professional.