Home valuation sites are the rage among homeowners, buyers, and sellers. Instead of hiring an appraiser to look at a house and write up a well educated estimate of its true market value, you can go online, type in the address, and find out the market value yourself instantly and best of all for free! Why pay an appraiser several hundred bucks?

Now, I like technology as much as the next guy, and I believe in handing over more power to the people, but this is just another instance in which we are taking the human gatekeepers out of real estate transactions and leaving the system wide open to abuse. We are literally turning the buying process into a free-for-all, in which he who pushes the buttons on the keyboard defines the value of a home. We may as well install money machines in everyone's home that print twenty dollar bills.

With these home valuation sites, whenever a transaction is recorded, the data is automatically transferred to the home valuation system, where sellers and buyers can immediately access the information.

While that's not so bad in and of itself, it can intensify the negative effects of real estate and mortgage fraud. If, for example, a property's value is artificially inflated as a part of a flipping scam, that property's inflated value appears immediately online. People selling homes in the same area see the numbers and instantly jack up their asking prices. Buyers see property values rising and are willing to pay more. A con artist who knows how to play the game, can pull the strings on the system like a puppeteer, inflating and deflating the market at will.

Now, you might argue that given the proper incentive, appraisers have been known to fudge the numbers, too. You might also argue that these valuation models are even more honest—after all, can't a computer automatically check whether a property's value is out of sync with the prices of similar properties in the same area? In theory, yes, but in practice, these valuations are significantly less reliable than what competent, certified appraisers can deliver. In some areas, they may be off by 10 percent. In other areas, the discrepancy can be as much as 50 percent! I tried to look up the value of my own house, and it wasn't even listed.

In addition, these valuations can be extremely old. Based on a valuation model, a bank could conceivably approve a mortgage loan to purchase a house that burned down two or three months ago. Only a human being, an appraiser visiting that house and looking at it inside and out, can determine whether the valuation is truly accurate.

Recently, I sold a home to a client who was approved for a mortgage loan in less than 24 hours. The lender didn't require an appraisal and never even looked at the house. They relied exclusively on a home valuation model to verify the property's value. I have seen enough fraud to know that if a seasoned con artist had put together a phony deal, that valuation model could not have detected it, and the deal would have proceeded without the slightest hint of suspicion.

As we rely less and less on the human factor as a system of checks and balances, we are sure to see an increasing problem with real estate and mortgage fraud. Home values will be able to skyrocket overnight without governance, creating a housing bubble that will make the dot.com crash of the nineties look like a soft landing.

When I see customers, clients, and even a few of my colleagues singing the praises of these online home valuation sites, all I can say is, "No thanks, I'll stick with a licensed, reputable appraiser."

Published: May 9, 2007

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Ralph R. Roberts, CRS, GRI is an award-winning and internationally recognized real estate agent, author, coach, and speaker. Throughout his career, Ralph has proven his commitment to helping other real estate and sales professionals build upon their past and present success, grow and expand their businesses, and provide a rich and rewarding future for themselves, their customers, their employees, and their families. As president and CEO of Ralph Roberts Realty, Ralph has personally helped thousands of consumers realize their dream of homeownership. While selling over 10,000 homes (and buying and selling over 3,000 investment properties) throughout his 30-year career, Ralph has made the time to mentor and coach hundreds of professionals in real estate, sales, and a host of other fields. Ralph is a recognized authority on Real Estate and Mortgage Fraud; Residential Real Estate; Personal Salesmanship; Sales Force and Office Management, Motivation, Design, and Team Building; and Foreclosure Self-Defense and Loan Modification, fields in which he has demonstrated his commitment to preserving the American Dream of Homeownership. Ralph's numerous websites, blogs, seminars, and speaking engagements engage, entertain, and educate both consumers and professionals. Ralph is also an accomplished author with several successful titles to his credit, including: Power Teams: The Complete Guide to Building and Managing a Winning Real Estate Agent Team Financing Real Estate Investments For Dummies (John Wiley & Sons) Mortgage Myths: 77 Secrets That Will Save You Thousands on Home Financing (John Wiley & Sons) Foreclosure Self-Defense For Dummies (John Wiley & Sons) Protect Yourself from Real Estate and Mortgage Fraud: Preserving the American Dream of Homeownership (Kaplan) Foreclosure Investing For Dummies (John Wiley & Sons) Foreclosure Myths: 77 Secrets to Saving Thousands on Distressed Properties (John Wiley & Sons) Advanced Selling For Dummies (John Wiley & Sons) Flipping Houses For Dummies 52 Weeks of Sales Success (John Wiley & Sons) Walk Like a Giant, Sell Like a Madman (John Wiley & Sons) Cross-Cultural Selling For Dummies (John Wiley & Sons) To learn more about Ralph, visit AboutRalph.com, check out his daily insights on real estate and mortgage fraud prevention at FlippingFrenzy.com, or visit his latest blog dedicated to helping distressed homeowners fight foreclosure, KeepMyHouse.com. You can reach Ralph at or by calling (586) 751-0000.