Most of us have a love/hate relationship with technology. It can make your life much easier, or it can be your worst headache. That certainly applies to the world of real estate technology. The two tools you’ve probably heard the most about are home value algorithms and artificial intelligence (AI).
An example of a home value algorithm is the Zillow Zestimate. They do not publish their algorithm, but virtually all these algorithms are based on public information such as property documents, tax records, previous sales and market trends. They may also take other factors into consideration. In a regular subdivision with uniform lot sizes, similar houses of about the same age and consistent finishes, computer algorithms might come close to the home’s market value; however, it is much more difficult to determine an accurate lake home value.
Why is there such a discrepancy between algorithmic valuation and true property values? Many factors. For one thing, public records are often inaccurate. Basements get finished, pools are built, rooms are added, and upgrades are not reported to the tax assessor. This makes public records unreliable. More importantly for lake residents, there is no public record of the depth of your water, type of dock, view of the lake, walkability of your path or dock position in the cove. It can’t determine if there’s a nearby bridge that blocks your access to the larger part of the lake (too low for a boat to fit under at full pool) or a sandbar that turns your cove into its own pond during big droughts. These factors have a profound impact on your home’s worth. Plus, the market trends they use are for the overall market, not a specialized market such as lake homes. For example, during COVID, the lake market fared much better than metro Atlanta averages. I’m sure you can guess why.
Unlike homogenous neighborhoods, almost every lake home is unique in its combination of features. An algorithm might give you a starting point, but you’re more likely to get a true market value from lake appraiser or real estate specialist who can take those variables into account. Sometimes, expert eyeballs trump terabytes of data.
Regarding artificial intelligence, it has progressed in leaps and bounds over the past few years. You’ve probably heard of ChatGPT or Google’s Gemini (formerly called Bard). In these systems, you can ask a question and get an answer or output that is surprisingly detailed. However, depending on which system you’re using, it probably uses public data to answer real estate questions, so it is no more informative than the previously described algorithms. For example, if you ask ChatGPT for the average price of a lake house in your zip code, it says it can’t determine that and refers you to specific sites or recommends that you contact a local agent expert.
Almost everyone starts their home search on the internet, so it certainly has its place. It’s a free, fast, efficient medium for learning the market and monitoring trends. Even so, it’s nice to know that the human factor is still needed for the best results.
