Why online valuations are a big joke
Back in the 1990’s World Chess Champion Garry Kasparov played a series of chess games against the world’s best computer, Deep Blue. For the 1st time ever, a computer beat a world champion in a game of chess. But even with that, Kasparov still won the 6 game series 4-2.
So you’re probably wondering how a person could ever beat a computer at chess. Computers can calculate millions of moves per second, and a human a tiny fraction of that.
The answer is simple. Its because humans programmed the computer to play chess in the first place. And those humans were probably average chess players, certainly not grandmasters, and certainly not Garry Kasparov. The other important factor is that chess is not necessarily about the raw moves, but about the patterns. Humans can recognize those patterns far better than a computer can. Also a human uses their experience and judgement, and not just brute force calculation. Humans also know which potential lines to NOT calculate, because they know they won’t lead anywhere.
So how does this relate to real estate and home values? Simple. Humans will almost certainly do a better job at valuing a home than a computer will because of those same factors. Experience, patterns, and judgement.
The same way chess computers were programmed by novice chess players, real estate algorithms are created by statisticians and programmers. They take data and try to make a quantitative decision about a home value, when in fact, a home value is a purely qualitative decision that is far more human driven than any data.
Since real estate is local, with different factors affecting values in every market, programming a computer to make a decision on a home’s value would be akin to using a computer to decide who would win a beauty contest based on the participants measurements alone. Sure it would be right some of the time, but in other cases it would do a horrible job. Which is why over 50% of all online valuations tend to be off by more than 8%, and in many cases, up to 70% off.
What a home is worth is certainly more than how many square feet, how many bedrooms and then apply those numbers to some formula for average sale prices in the area. Sure sometimes those values end up being close, but that’s like saying the 1 and 20 are close on a dart board and sometimes you hit the 20 and sometimes the 1. Someone looking to sell their home can’t afford to start the process based on an arbitrary value, whether it be high or low, but instead need to know what they are likely to actually sell for.
So why all the fascination with automated online valuations? Simple. They are fast (albeit inaccurate) and the homeowner is spared from having real estate agents hounding them with relentless follow-up about selling their home. For most people the inaccuracy is far more tolerable than the alternative. But the computer has never seen your house. The computer doesn’t know what the finishes or upgrades in your house are. The computer can’t see your house the way a human can, to provide a qualitative estimate of what another human would be willing to pay for it. Its just guessing, and in many cases, not very well.
Which is why we made Homing In.
Homing in provides homeowners with a valuable service. They get a much more accurate idea of what their house is worth (especially if they upload photos of their home and provide details not available in the tax records) and they get it in a relatively short amount of time. They also get anonymity (as much as possible) because we don’t give out any of their information (other than the address which the agents need). In many cases the homeowner gets a full market analysis including actual comparable sales and current listings that have been hand-picked as most likely to be what they would expect to sell for.
We know that most good real estate agents sell virtually all their listings within 3% of what they told the homeowner they would ultimately sell it for (not the initial list price which in many times is homeowner-pride driven) and certainly would never be 70% off on an estimated value. If so, they would not be in business long.
So sit back, relax, take a few pictures, tell us what makes you home valuable to you, and let our agents provide you with a professional estimate based on their experience, knowledge, and those factors that actually are important in your market and leave the automated valuations for your entertainment purposes only.