Real Estate Analysis Robots and Real Estate: How Robots May Replace Real Estate Appraisal Methods by Jenna Ramadan July 3, 2018April 30, 2019 by Jenna Ramadan July 3, 2018April 30, 2019 Normally, real estate investors are not accustomed to hearing the words robots and real estate appraisal methods in the same sentence. Well, here comes a little surprise. We all understand how technological innovations have molded the world we know today. These innovations have made their way into the real estate world, specifically the area of real estate appraisal methods. Here, we explore how real estate appraisal methods could be completely replaced by real estate analysis software. Heads up- you may want to reconsider that home appraiser career. Property Appraisers and Robots Based on their expertise, property appraisers are normally asked to give a property evaluation. The property valuation house appraisers come up with gives lenders a property value to work with. Investment property loan lenders then decide how much of an investment mortgage is assigned to a buyer based on an appraiser’s assessment. This is where the robots come in. Now, we’re not talking about the artificial intelligence that walks on two feet and is made of metal. Robots will not be walking with black suits giving real estate property analytics. Well, who knows. The main point here is that by robots, we mean new real estate investment software that is doing the job of a certified real estate appraiser. Here’s Where the Robots Come In Investment property mortgage lenders are looking more and more into technology. Instead of looking to a property appraiser for a real estate valuation, they turn to a home appraisal estimate based on computer programs. These programs use algorithms that provide almost as much credibility as real estate appraisal methods. Lenders also benefit from the instant results and much cheaper price tag computers have to offer. Zillow Group Inc. is one of the “robots” going after the job of real estate property appraisals. Real estate appraisal methods are crucial to putting a value on an investment property. Part of those real estate appraisal methods is to take into consideration anything that would give more or less value to a home. Zillow “Robotics” Zillow has shared that its algorithms are growing smarter and smarter. Smart to the extent of learning how to capture details of the investment property neighborhood analysis and other price determiners. These could be anything from hardwood floors to smooth granite countertops. Now, although the investment property analysis software does not perform house appraisals, it is a huge help for real estate appraisal methods. The chief analytics officer at Zillow explains how his lead engineers are picking at the hair of the website’s photos provided by real estate agents and real estate investors. Why? They are looking for those interior features that differentiate one home value from the other. They’ve even begun looking at the external look of the home, teaching their algorithms to recognize trend and appeal (anything that would cause a buyer to pay more). Crazy, we know! Real Estate Appraisal Methods and The Mashvisor Robot It looks like technology is replacing real estate appraisal methods. The two main real estate appraisal methods we’re focusing on today are: Sales Comparison Approach Income Capitalization Approach Get to Know More: What Are the Main Property Valuation Methods? Each of these methods has one thing in common: their purpose. Features of the home, location, and other aspects of real estate make up home appraisal estimates. As a real estate investor, you understand how important the valuation of a property is. It is one of the indicators of whether or not you’ve got a money maker on your hands. Not to mention how it’ll aid in avoiding overpaying for a rental property. These are only some of the many advantages of investment analysis. Robots are already replacing some of the pieces of real estate appraisal methods. How? Here’s the breakdown of the verdict. Sales Comparison Approach: #1 of Real Estate Appraisal Methods The general idea of the sales comparison method of property valuation is to compare the investment property at hand with properties similar to it. This includes the process of finding real estate comps to compare with the rental property. Normally, this could take a good amount of time, potentially costing you good money. Mashvisor is one of the ‘robots’ that could be replacing this home appraisers job to find real estate comparables. Our real estate platform is able to provide you with real estate comparables, as well as a ranking of how similar they are to your real estate investment property. Within a matter of seconds, real estate comps are right before your eyes for less time and a much cheaper price. Do you have questions about Mashvisor? Click here to read our FAQs and learn about our tools. Income Capitalization Approach- #2 of Real Estate Appraisal Methods Real estate investors like you understand the importance of real estate appraisal methods. Another important real estate valuation method is the income capitalization approach. Generally speaking, you are focusing on all aspects of income generation. Or in other words, the real estate performance metrics that reflect how much of a money maker your income generating property is! Real estate appraisal methods that deal with income capitalization focus on the return on investment and net income property numbers. Now for the robots. Mashvisor yet again is able to take control. The calculation and evaluation that goes into this method can be very time-consuming. Not to mention the spacious room for human error to occur. Mashvisor is able to provide rate of return projections depending on the investment property you choose. Real estate analytics like cash on cash return and cap rates are needed for real estate appraisal methods like the income capitalization approach. Mashvisor the real estate robot gets the job done, giving home appraisers a run for their money. Quick Read: How Data Makes Real Estate Investors Rich: A Mini Guide Robots Are Taking Over the World Even the real estate world. We can agree that there are some limitations to using a robot over an actual property appraiser. However, there is no doubt that this technological innovation is making its mark on the world. So tell us, do you think robots are going to take over the real estate world? Or do humans have the upper hand? Leave your thoughts below and let us know! Start Your Investment Property Search! START FREE TRIAL Start Your Investment Property Search! START FREE TRIAL 0 FacebookTwitterGoogle +PinterestLinkedin Jenna Ramadan Jenna is Content Writer at Mashvisor with a passion for creative writing. She enjoys covering all aspects of the real estate investment business. Previous Post Mistakes to Avoid Making with Investment Property Next Post How to Become a Landlord: A Step-By-Step Guide Related Posts A Beginner’s Guide on Calculating the Net Present Value of an Investment Property Why Is Cash Flow Analysis for Investment in Real Estate Crucial? Comparative Market Analysis: The Fastest Way to Get It Done How to Calculate the Cap Rate for an Investment Property The Best Price to Rent Ratio for Investing in Rental Property Investment Property Calculator: Do You Need One to Make Money in Real Estate? How Is Inflation Affecting the US Real Estate Market? How to Conduct Income Property Analysis The Best Investment Property – A Positive Cash Flow Property Everything to Know About Real Estate Comps and How to Find Them How to Conduct a Rate of Return Analysis in Real Estate Should You Be Buying Atlanta Investment Properties for Sale in 2018? 1 Comment Chris Baiden August 24, 2019 - 12:36 pm If this in fact becomes the way to appraise a property, the real estate market will be doomed for several years. Taking Zillow as case in point, the Zestimates their algorithm creates for properties is way off 33%+ of the time. Further, in analysing 2 properties exactly the same and side by side, it is unclear where it comes up with a valuation discrepancy of $30k+ more for one from the other, given that the features, size, age, and work, done in same year, is identical. I’ve also seen Zestimates for homes in a developer cookie-cutter lot, exact same home, be off by thousands of dollars, where the one that’s been remodelled is estimated lower than the eyesore. Try this for yourselves: go to your own home facts on zillow, and edit the lot size to 20 acres, then update. Does your property zestimate change? Oftentimes, it does not. Neither does updating any of the other features change it. Seen it happen several times, and I have no explanation for my sellers but to say “wait for my appraisal to be done”. I guess now that wont be the case. Should they then settle for a robot appraisal below market, and loose thousands of dollars, because the lender lends based on this bogus appraisal? Or are these sellers stuck in their house so not to loose equity? Nothing was menitioned as a counter-balance or appeal to the robopraisal. Without that, it’s not going to work. I will keep my appraiser license. 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