Remember the movie Weird Science where the two guys develop technology to make a doll real? If you’re my age, I’m sure you do. If not get to googling Kelly LeBrock.
She did some amazing things. She looked great, was sexy and had odd powers that turned the older brother into a pile of emoji poop. Weird huh? Everything about her was amazing on the outside, but something was weird. That’s how I feel about new technologies that AMCS, Zillow and others have offered the public. On the outside, it looks great but what’s really happening on the inside?
I’ve seen examples of this technology when it comes to appraisals. They claim to be faster, cheaper and accurate but even Zillow’s owner’s home price was way off base. Let me explain to you just how inaccurate this is.
Many of these companies rely on dirty data i.e. tax records and other public data that isn’t always accurate or vetted. What happens when you put an addition on your house, but the tax office missed that after the sale? Or that you’ve completely renovated your home? Maybe the neighbor hasn’t renovated in twenty years and the interior is falling apart. How can unverified data be superior to trained experts who are on site? Dependency on technology sites that produce and profit from bad information is dangerous.
Here’s another example how bad data works, because lets face it even you aren’t being fully honest. Say I said my car was in good condition on Kelley Blue Book when it’s only fair condition. What I see as good is not necessarily what a neutral professionally trained individual would see. If I use the wrong data when I go sell, that car will result in disappointment. The same applies to big data in real estate. On the upside, it goes the other way, too. Home sellers don’t want to leave money on the table.
Lenders and AMCS developed this technology, using unvetted data, to stream line your appraisal process making it cheaper and faster. That sounds good on the surface and some data is correct but as an appraiser, I often find mistakes in the data, big mistakes and lots of them. This is not an isolated extreme; it’s happening everywhere, and consumers need to be wise and sharp when it comes to cheap and fast.
Ask yourself these questions: did anyone come see your fabulous remodel? Did anyone accurately measure your home and new addition? Do these sites know the area or the surrounding amenities that help drive markets? If the answer to any of these is NO, then how confident are you knowing your net worth is being valued properly by these new technologies?
While technology is great in many ways and helped many areas of the appraisal profession, trying to determine your value based on sites like Zillow or an AMC hybrid is a risk in and of itself.
As a home buyer, seller, or if refinancing, it’s worth your attention to verify the sources and validity of your value estimates. The best way to truly know your net worth is to hire an appraiser who is independent of banks and AMCs and can give you that neutral, unbiased, on site and verified service.