Do we really need another Zillow Zestimate-style online gizmo to tell us what a computer model says our homes are worth? Probably not. There already are scads of real estate and mortgage websites that offer some type of automated home valuation feature, such as Redfin, Realtor.com, Chase Mortgage, RE/MAX, Homes.com, Bank of America Mortgage and Coldwell Banker, to name just a handful.
You’ve likely visited one or more of them — and you know that virtually none comes up with the same value conclusions. In fact, too often they don’t come anywhere near what local realty agents and professional appraisers tell you is the current market range for your property.
So why would a well-known company venture out with a new version so late in the game? Lending Tree, the popular mortgage site, which debuted its own valuation model earlier this month, can tell you why: Because none of the other value estimators calculate your home equity or suggest how and when you might want to tap into it.
Is that important to you? Maybe, maybe not. Say you don’t pay much attention to what houses like yours are selling for lately so you’re not quite sure what your home is worth. You probably have a better sense of the balance on your mortgage since it’s typically included with your monthly loan statements. But without a good fix on the home value, you’re missing the essential ingredient.
Your equity at any moment is your home’s worth minus the debt against it. If you own a $400,000 house and you’ve got a $250,000 mortgage, you’ve got $150,000 in home equity, exclusive of transaction expenses if you sold the place.
But even with that knowledge, the question remains: What would it cost to turn some of that equity into spendable cash, whether for home improvements, kids’ college tuitions or some other worthy purpose?
This is where Lending Tree believes it has an edge: It’s got your mortgage balance information and can provide what it purports to be your home value estimate — together. Once you’ve indicated that you’d like to check rates and terms on home equity lines of credit (HELOCs) or home equity loans, you’ll get preliminary offers from “up to five” competing lenders from the company’s network of 40 banks active in those products, according to Charles Battle, Lending Tree’s director of product management.
If you’re not quite ready to move ahead but instead prefer to track your equity, credit and mortgage situation on a regular basis, you can sign up for a more comprehensive “My Lending Tree” service, for which there is no charge. It provides you monthly updates plus periodic “alerts” on your home equity movement. You get an alert when there’s “an actionable opportunity” for you to tap into your equity on favorable terms, based on “real-time market data,” changes in your credit files and equity levels, according to the website. There’s no requirement that you take any action. “You can ignore it,” says Battle, but it’s designed “to tell you when you can save money.”
Before checking out this new entrant into the home valuation arena, what do you need to know about Lending Tree and the accuracy of its estimates? Lending Tree describes itself as “the nation’s leading online loan marketplace” connecting “consumers with multiple lenders who compete for their business.” Visitors can get quotes from lenders on first mortgages, credit cards, student loans, personal loans, reverse mortgages and home equity products.
In the fine print on its website, though, the description is more legally precise. The company is “a marketing lead generator” and “a duly licensed mortgage broker.” Lenders pay Lending Tree for “leads” — that’s what you are when you indicate you’d like to receive offers. Be aware that before you can get any competing offers, you need to divulge some highly sensitive information about yourself — name, address, Social Security number, income, credit and the like — the same as you would for any other mortgage application. If you’re not willing to do so, you won’t be able to get offers.
How does Lending Tree’s valuation model stack up against well-established players such as Zillow and Redfin? That’s hard to know because unlike those two, Lending Tree does not divulge its model’s median error rate. The company does say that its accuracy is “regularly tested” and is “similar to other high quality [valuation models] on the market.” Hmmm.
Ken Harney’s email address is firstname.lastname@example.org. Harney is executive director of the National Real Estate Development Center.