How Accurate is Your Online Home Value? A Southern Indiana Seller’s Guide

By William Andes, Andes Realty Team | Southern Indiana Real Estate

You’ve done it. Probably more than once. Maybe late at night, maybe over coffee on a Saturday morning. You pulled up one of those online home value estimators, typed in your address, and waited for the number.

And the number told you something. It told you what a machine thinks your home is worth.

Here’s the problem: the machine is guessing. And when it comes to what is likely the largest financial asset you own, a guess isn’t good enough.

How Do Online Home Value Estimators Actually Work?

Online home value tools are wildly popular, and it’s easy to see why. They’re free, they’re instant, and they deliver a number that looks authoritative. The problem is that looking authoritative and being accurate are two very different things.

These automated valuation models (the industry calls them AVMs) work by pulling public records, tax assessments, and recent nearby sales into a formula. The formula spits out a number. That number lands on your screen with the confidence of a bank statement, but without the rigor behind one.

But here’s what the formula doesn’t know:

It doesn’t know you remodeled the kitchen last year. It doesn’t know the house three doors down sold under financial distress, or that the one across the street was a builder’s personal project with $80,000 in upgrades that never hit the tax rolls. It doesn’t know that the lot behind yours just got rezoned, or that the school district boundary shifted.

It doesn’t know what your home feels like when you walk through the front door.

How Accurate Are Online Home Value Estimates?

Most major automated valuation tools report a nationwide median error rate of around 2% for on-market homes and around 7% for off-market homes. That sounds small until you do the math. A 7% median error means an off-market estimate on a $400,000 home could easily be off by about $28,000 in either direction. On a $600,000 home, that’s approximately $42,000. In some states, the error rate can exceed 12%.

That’s not a rounding error. That’s a second car. That’s a year of college tuition. That’s money you either left on the table or priced yourself out of the market over.

Even the platforms themselves acknowledge these limitations. Most include disclaimers noting that their estimates are not appraisals and should be used only as starting points, not definitive valuations. That’s an important distinction that’s easy to miss when a confident-looking number is staring back at you from your phone screen.

In our experience serving homeowners across Clark, Floyd, Harrison, and Scott counties, we’ve seen automated estimates miss by far more than 7% on homes with unique characteristics, recent renovations, or unusual lot configurations. The more distinctive your property, the less reliable the algorithm becomes.

When the Algorithm Was Put to the Test

If you need proof that these tools aren’t ready to replace human judgment, look at what happened when one of the country’s largest real estate companies decided to trust its own algorithm with real money.

The company launched a program to buy homes directly from sellers, sight mostly unseen, using its own automated valuation tool to set offer prices. The idea was to move fast, buy at scale, and flip homes for profit. They had some of the best data and engineers. Billions in backing.

The result? A multi-million-dollar loss on that home-flipping business in a single year, leading the company to shut the program down and lay off members of its staff. They overpaid for thousands of homes because the algorithm couldn’t account for the things that actually determine value: condition, context, neighborhood dynamics, market momentum.

If the company with arguably the most real estate data on the planet couldn’t make its own algorithm work with real dollars on the line, that should tell you something about the number sitting on your screen right now.

What Actually Determines Your Home’s Value

Algorithms are built on data points. But the factors that move a home’s price up or down are often the things that never make it into a database.

Condition and updates. A home with a new roof, updated electrical, and a renovated primary bathroom is worth meaningfully more than an identical floor plan that hasn’t been touched since 2004. Tax records don’t capture that difference. An experienced agent walking through both homes spots it in minutes.

Neighborhood trajectory. Is the area gaining momentum or losing it? Are new families moving in? Are nearby commercial developments adding value or creating concerns? These shifts show up in pricing trends long before the algorithm catches on. In southern Indiana, we’re seeing this play out in real time. The revitalization of downtown New Albany’s historic district has pushed values on renovated homes well above what any automated tool predicted even two years ago. Meanwhile, pockets of Clarksville near the new retail corridors are seeing buyer demand that the algorithms haven’t caught up to yet.

Buyer psychology. Some features (a screened-in porch, a finished basement walkout, mature trees on a private lot) create emotional responses that drive offers higher than comparable sales would suggest. Other features, like a home backing up to a busy road or sitting on a flood-zone boundary, suppress value in ways the data often underweights.

Local market context. A home in Sellersburg and a home in Jeffersonville might sit five miles apart with similar square footage, but their values can differ by tens of thousands of dollars based on school districts, tax rates, and buyer demand patterns that shift from one neighborhood to the next. No national algorithm tracks those hyperlocal differences with the precision that pricing a home correctly requires.

This is exactly why a comparative market analysis prepared by a local agent remains the most reliable way to understand what your home is actually worth. A CMA accounts for the things the algorithm can’t see, and it weights them the way a real buyer would.

What Happens When the Appraisal Doesn’t Match the Algorithm

Here’s a scenario we see regularly, and one that catches sellers off guard: you price your home based on an online estimate, a buyer makes an offer near that number, and then the bank’s appraiser comes in lower.

This is called an appraisal gap, and it can stall or kill a deal. The lender will only finance based on the appraised value, not the agreed-upon sale price. That leaves someone holding the difference. Either the buyer brings extra cash to the closing table, you reduce the price, or the deal falls apart entirely.

Appraisal gaps happen most often when a home is priced using data that doesn’t reflect its true condition or the current pace of the local market. An AVM might say your home is worth $375,000 based on tax records and a sale from six months ago. But if the appraiser sees deferred maintenance that the algorithm ignored, or if the comparable sales the tool used were from a different school district, the appraised value could come in at $350,000 or less.

On the flip side, we’ve also seen appraisals come in higher than the online estimate, particularly on homes where the owner invested in updates that the tax rolls never captured. The gap works both ways, and in both cases, the algorithm was the one that got it wrong.

Working with a local agent who understands how appraisers evaluate properties in your specific market helps you price strategically from the start, reducing the risk of a gap that costs you time, money, or the sale itself.

So Should You Ignore Online Home Value Tools Entirely?

No. These tools have a place. They’re a reasonable starting point for getting a general sense of where your home might fall in the market. If you’re casually curious or just beginning to think about selling, there’s nothing wrong with checking a few estimates to orient yourself.

The danger comes when that starting point becomes the final answer. When you list your home based on an algorithm’s number without verifying it against local market data, you risk one of two outcomes: pricing too high and watching your listing go stale, or pricing too low and leaving real money behind.

The smartest approach is to treat online estimates the way you’d treat a rough sketch before hiring an architect. It gives you a shape. It doesn’t give you a blueprint.

Before You List: A Home Seller’s Pricing Checklist

If you’re thinking about selling, use this checklist to make sure your pricing strategy is built on more than an algorithm:

• Check multiple online tools, not just one. Compare estimates from at least three platforms. The spread between them tells you how much uncertainty exists in the data.
• Document your updates. Make a list of every improvement you’ve made since purchasing the home, including approximate costs and dates. Your agent and a future appraiser both need this information.
• Research your neighborhood’s direction. Look at recent sales within a half-mile radius. Are prices trending up, flat, or declining? Are homes selling above or below asking price?
• Request a comparative market analysis. Ask a local agent to prepare a CMA based on current, verified data. This is the single most important step you can take before setting a list price.
• Understand your appraisal exposure. Ask your agent which comparable sales an appraiser is likely to use and whether your target price is supportable. Pricing strategically from the start helps avoid appraisal gaps that delay or derail closings.
• Know your bottom line. Factor in closing costs, remaining mortgage balance, and any concessions you may need to offer. Your net proceeds matter more than the list price.

The Bottom Line

That number on your screen isn’t your home’s value. It’s a data point, and one that’s missing most of the context that actually matters.

Your home has a story the algorithm can’t read. The upgrades you’ve made, the way the light hits the living room in the afternoon, the neighbor who keeps the block looking sharp, the fact that yours is the only lot on the street with a flat backyard. These things matter to buyers. They should matter in your pricing, too.

Before you make any decision based on what a website tells you your home is worth, talk to someone who’s actually been inside the homes selling in your market. The difference between an algorithm’s guess and an informed opinion is often tens of thousands of dollars.

And when it’s your largest asset, that difference matters.

William Andes is a licensed Realtor® and founder of the Andes Realty Team, serving homeowners and buyers across Clark, Floyd, Harrison, and Scott counties in southern Indiana. With years of experience in the local market, William specializes in residential sales, accurate home pricing strategy, and helping families navigate the region’s evolving neighborhoods. For a complimentary comparative market analysis of your home, contact the Andes Realty Team.