Can Information Technology Really Tell Us the Market Value of a Home? The residential real estate market is changing dramatically with the advancement of information technology tools such as data aggregation systems and computational models. Today’s real estate consumer is bombarded with countless tech guru “visionaries” and “wanna be” websites preaching to buyers and sellers that they possess the magic formula that will tell us the real market value of a home
… without ever actually seeing what’s inside, of course. Seeing what’s inside. Aside from location, it is the single most crucial part of valuing a residential property. And yet it is the one thing in real estate that requires skilled, experienced human eyes to interpret. Homes are not computers; they generally do not have a standard “Intel Inside” story to tell. Even subdivision homes with a few standard models have variation (though these are the easiest to plug into computational model that will deliver a close result).
Unlike the automobile, where every manufacturer installed enhancement and upgrade is priced and depreciated over time using universally accepted methods, the hundreds (and sometimes thousands) of changes that a home can undergo over time are virtually never publicly aggregated. Nevertheless, these data aggregation companies are more than happy to provide distorted estimates as a means to attract buyers and sellers to their websites. It doesn’t matter that their information is inaccurate; all that matters is that they get people to visit their sites and use those visitors as a means to generate revenue
– typically through advertising with real estate brokers and agents who want to be seen by the consumers who are visiting these sites.
To truly know the value of a home requires a personal investment of time, looking not only at the location, size, bedrooms, baths, etc. (the type of information contained in your local multiple listing service), but looking inside. Understanding structural expansions, upgrades and improvements; recognizing the difference between serious issues and cosmetic ones and most importantly comparing quality features from one home to another. These are the things that experienced realtors and
appraisers do every day. These are the critical and experienced eyes that save buyers tens of thousands of dollars or earn sellers tens of thousands of dollars. This is a serious hands-on approach to knowing real world real estate value. Experienced realtors will spend hundreds of hours each year updating their detailed knowledge of the market, all to the benefit of their buyers and sellers.
Computing aggregation tools cannot possible know the scope of upgrades and improvements and changes and additions made to a home – particularly over time – because the quality and cost of residential real estate changes are not available in public records. Cities and counties, the entities best equipped to do so, simply do not have the time or resources to validate the quality and scope of changes made to residential real estate in their jurisdictions – about all they can do is assure that
changes meet code requirements. So the next time you see a computer generated estimated of a home’s value ask yourself, “how does a computer know what is inside?”
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Cost of Living
The best purchasing power of any waterfront metro area in the U.S. 38% more purchasing power than New York City. 43% more purchasing power than San Francisco.