We have all used Kelly blue book values to see car values, now KBB is getting into the house business creating a “blue book” value for your house. How accurate is the new KBB value? How is this different than the Zestimate; realtor.com estimate, or any other automated valuation model? Should you trust KBB?
How accurate is Kelly Blue Book on car values?
Before getting into the home valuation model, it is important to discuss how accurate KBB is in its core market, cars. I don’t know about everyone else, but I have traded in over 20 cars throughout the country and never have I gotten the KBB trade in value. KBB sometimes can be close, but it rarely gives the actual value you receive for a trade. According to various analysis Kelley Blue Book (KBB) trade-in value is an estimate rather than a mathematical “margin of error,” but in practice, offers frequently diverge by $500 to $2,000+ (or 10-20% of the vehicle’s value) from the actual cash a dealership will pay.
Dealerships primarily rely on real-time wholesale auction prices using dealer-only subscription services like Black Book or the Manheim Market Report (MMR). These auction tools reflect exactly what similar cars are selling for in your region right now, which helps dealers calculate overhead, reconditioning costs, and profit margins.
If there is a 10 -20% margin of error on a car, what about a house. Assume a million-dollar home that could be a 200k swing in price!
KBB getting into the home valuation market
Unlike automated valuation tools that generate an instant, purely algorithmic number, KBB Homes uses a data-driven process with human oversight. Essentially they are trying to take a hybrid approach between a full broker price opinion and Zestimate which is totally automated.
- User Input: Homeowners submit information online about their property’s layout, unique features, and upgrades.
- Condition Photos: Users upload photos highlighting the interior and exterior condition of the rooms.
- 24-Hour Delivery: True Footage’s appraiser-grade technology and a pricing specialist generate a personalized valuation report within 24 to 48 hours.
- Fair Deal Zone: Instead of a fixed number, owners receive a low-to-high value range calculated to be within 3% of a final sale price.
- Vetted Strategy: The free report comes with market insights, comparable sales data, and a low-pressure phone consultation with a specialist
The KBB model is not instant, it is similar to a broker price opinion. It is important to note that the only way to get the KBB number is to actually meet with a broker.
The overriding intent of the KBB model is lead generation for listing agents who can pay a monthly fee to get access to a zip code (or part of a zip code).
Is KBB more accurate than Zillow or Realtor.com?
Unfortunately there is not a way to accurately compare as they don’t publish the KBB number. With that said, I assume KBB is likely a bit more accurate because agents are actually looking at the condition of the house to help price a property. With that said it all depends on the property. If a property is in a uniform area with similar houses/conditions (like a suburban area) then Zillow is pretty accurate. The real test of KBB or Zillow is when it comes to areas that are not totally uniform. Think of an intown neighborhood in any large city, some have been restored, some are older in bad shape, and small differences like one street versus another can have huge differences on price.
Be careful with any AVM or BPO type product
Unfortunately although the models are getting better, they are definitely not perfect or a substitute for actual market knowledge. Houses are unique and not a commodity especially in older properties, urban areas, or rural areas which means really the best use of AVM or BPO models is in suburban areas where the variation amongst properties is low. I have seen models off up to 500% either direction so be careful and ensure you truly understand the property and market.
Kelly Blue Book home values not a real estate game changer
Based on the press releases, you would think the entrance of KBB to the home valuation market is earth shattering. Unfortunately, the media needs to temper their expectations as KBB home valuation is going to be a small niche product and will not radically replace Zillow or Realtor’s estimations. KBB is merely trying to automate the process of someone calling a realtor to come by and let them know what the prospective list price would be.
At the end of the day, unless the property is very uniform in a very uniform area the models are likely off. How much they are off is the million dollar question. Remember all these models do not replace on the ground knowledge.
There is no golden arrow to value real estate. Real estate is not a commodity so you must physically walk the property and know the area well. Be careful with KBB and any other AVM tool as the accuracy can be very questionable on certain properties.
Additional Reading/Resources:
- https://www.thestreet.com/real-estate/kelley-blue-book-homes-launch-zillow-zestimate-challenge
- https://www.fairviewlending.com/zillow-stock-plunges-impact-on-real-estate/
- https://www.fairviewlending.com/will-new-lawsuits-radically-alter-how-real-estate-is-bought-and-sold/
- https://www.fairviewlending.com/is-this-the-perfect-storm-for-the-spring-housing-market/
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Glen Weinberg personally writes these weekly real estate blogs based on his real estate experience as a lender and property owner. I’m not an armchair reporter/writer. We are an actual private lender, lending our own money. We service our own loans and own commercial and residential real estate throughout the country.
My day job is and continues to be private real estate lending/ hard money lending which enables me to have a unique perspective on the market. I don’t accept any paid sponsorships or ads on my blog to ensure accurate information. I’ve been writing this for almost 20 years and have over 30k subscribers. Please like and share my blogs on linkedin, twitter, facebook, and other social media and forward to your friends 😊. I would greatly appreciate it.
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Written by Glen Weinberg, COO/ VP Fairview Commercial Lending. Glen has been published as an expert in hard money lending, real estate valuation, financing, and various other real estate topics in Bloomberg, Businessweek ,the Colorado Real Estate Journal, National Association of Realtors Magazine, The Real Deal real estate news, the CO Biz Magazine, The Denver Post, The Scotsman mortgage broker guide, Mortgage Professional America and various other national publications.
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