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By Ralph Roberts

RISMEDIA, April 26, 2007-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 person, 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 $20 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%. In other areas, the discrepancy can be as much as 50%. 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 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."

Ralph R. Roberts is the author of Flipping Houses For Dummies (John Wiley & Sons) and Protect Yourself from Real Estate and Mortgage Fraud: Preserving the American Dream of Homeownership (Kaplan, August 2007) and is the official spokesperson for Guthy-Renker Home.

For more information, visit or contact Ralph by e-mail at or by calling (586) 751-0000.