Glen Kangas from the SoCal Appraisal Vlog and GA Appraisals, Inc., here to talk to you about artificial intelligence, websites like Zillow and how to protect yourself as a consumer.
Artificial intelligence is a very impressive technological feat, and the mortgage industry has been enamored with it for quite some time now. It started with with Automated Valuation Models, or AVM’s and has now shifted to real estate websites like Zillow, House Canary, and Redfin, which promise instant feedback on a home’s value.
We love our technology, and it really is great! It gives us more freedom, parks our cars, and keeps us in touch with friends and family from far away. But when it comes to decisions about one of the most expensive investments we’ll ever make, can we really blindly trust technology to help us make the right decision?
The actual term for this is TECHNOCHAUVANISM, which is simply the belief that technology is always the solution to every problem.
Stephen Hawking, one of our most renowned scientists, once said, “Success in creating AI would be the biggest event in human history. Unfortunately, it might also be the last, unless we learn how to avoid the risks.” What he is saying, is not to just rely on technology to do the job for us.
Take me for instance, I am a Type 1 diabetic and I use an insulin pump. I recently got the newest pump, newest technology, with a sensor that you can put on Auto mode to help regulate my blood sugars, fantastic, right! My blood sugar management issues are solved thanks to technology! Ah….no.
No matter how much I want technology to take care of it for me, it’s up to ME to control the inputs, what I eat, how much I exercise, etc. Does the pump, which is the technology, know anything about the inputs? No it doesn’t, the technology is just a tool to help me do a better job of controlling my blood sugars. I am the expert on my diabetes
So, while artificial intelligence can offer a lot to the real estate industry, it is also important to understand the risks of relying on it when deciding what a home is really worth.
In reality, Zillow, Redfin and sites like them are just a marketing tool, “click bait” if you will, designed to get you to go to their website, and it has been really successful at that. It’s no different, than “Where are those stars now?” or one I saw today “The dark side of owning a car collection” like there could be a dark side to that. They are just trying to get you to their website to get your email address or some other info so they can market their services to you. Same thing for Zillow, Redfin, and such. It is important to note, that all of them also have small disclaimers telling you they are NOT appraisals, and are merely estimates.
For example, Zillow and others brag about their algorithms being within 10% of the real value at least 63% of the time, really?! That’s not even close to being accurate, heck, it’s not even close enough in horseshoes or hand grenades! To help make it more relevant, let’s look at what that really means. In Los Angeles County, the median home price is about $600,000, so that means on a home in that price range, that these websites are within $60,000 of the accurate value only 63% of the time! And remember, in school, 63% is a D!
How to Protect Yourself As a Consumer
Where technology can fall short with nuance, the appraisers inspection and experience allows them to know about your upgrades, your school district, your zoning, your location on a major traffic street, your view of the city, and HOW THOSE THINGS AFFECT VALUE! AI does not know any of that and cannot always use these factors to predict a market reaction and accurately determine the value of your home.
A wise appraiser once said…….Don’t let technology make important decisions for you, use technology to fit your needs and help you make an informed decision—— that was me, Glen Kangas, you can quote me on that!
So whether you are buying a home, selling your home to an Ibuyer, or you are a divorce attorney representing a client who owns a home, or a flipper who wants to know what the home will be worth once you remodel it, or…..heck, you know, whenever a valuation is needed, don’t be a technochauvanist, make a smart decision, protect yourself as a consumer, and hire a local appraiser who will USE technology, not just blindly trust it to give you an accurate opinion of value.
So until next time, here’s to hoping you are making INFORMED real estate decisions.
Some other perspectives from Appraisers around the country