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Gather the sold price and features of homes
Step 2
Determine and populate the features from Step 1
Step 3
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Step 4
Complete the features for your home
Step 5
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AI and Real Estate: Reshaping the Future
It is no big secret that the real estate sector has always been one of the slowest when
it comes to adopting technological advances and innovations. With that being said, real
estate is also going to be one of the main sectors that can actually benefit the most
from artificial intelligence (which is also more commonly referred to as AI). When it
comes to AI, the applications are only going to be as powerful as the quality and
quantity of the data that is fed into them. With that being said, it can be very
unstructured and extremely expensive to try and onboard the AI technology with real
estate. Now you need to keep in mind that real estate is going to be the second least
sector in regard to digitalization. However, over the past couple of years, the immense
potential of AI in the real estate sector has started to be noticed.
While the world continues to become more digitalized every single day, the amount of
data sources that we have available to us is growing exponentially. What's even more
important, is the fact that large enterprises have actually started working towards
having better data organization. This means that just about every single piece of
information that can be extracted from anything related to user content and property
price fluctuation is going to be tracked and analyzed. The main goal of this being to
get related valuable insights. With AI continuously growing, there are many different
ways that it is currently reshaping the future of real estate.
Here are the top ways that artificial intelligence is transforming the real estate
sector right now.
Artificial Intelligence Improves Your Home Search Experience
When you are looking for a new place to live, it can very easily become an extremely
daunting ordeal. While most of the home-search engines are going to have different
filters that allow you to find the most suitable home for your needs, it has actually
helped the home searching process become much easier and much more convenient. You can
filter out houses by price, the number of rooms, location, lot size, etc. While this
model is going to be very effective, it can still leave you with many more options than
you would care to look through. This is going to be where artificial intelligence can
help.
Take for example Trulia, which is a San Francisco-based online marketplace for real
estate. It uses artificial intelligence-powered personalization to streamline the home
search process. The algorithm will identify each user's preference, suggesting different
properties based on its findings. In Trulia's app, it is going to use what is referred
to as 'computer vision', to extract any kind of relevant information that it can find
from that particular user's photos, including color palettes, floors, construction
materials, etc.
Once the AI has done its job, the system will then show the user the very best matches
that meet those particular criteria, recommending other listings when appropriate. On
top of that, it will also take into consideration the similar properties that have been
looked at by users with similar preferences. This means that after only a few searches,
artificial intelligence can show you a superior level of personalization.
Artificial Intelligence Increases Lead Generation
If you have ever sold real estate, you already know that finding the ideal client is
simply a dream. You also know that there are going to be many clients who dream about
houses that they will never be able to afford. While Zillow had a special CRM that would
analyze thousands of different attributes to distinguish all of the different customers
who had real intentions of buying a property and separate them from the ones who were
simply browsing for curiosity. This technology would allow agents to save a ton of time
and effort by allowing them to only have to deal with the potential home buyers that
would match their niches.
AI would be able to take this same technology to the next level. For example, REX, which
is an AI-powered brokerage, can leverage the AI technology to market real estate to the
target audience that is actually able to purchase it. This is going to be very important
for any higher-end properties, as they are going to require a very sophisticated
marketing plan to be effective. With AI, it will very accurately be able to identify any
of the potential buyers that there may be through analysis of the REX websites. This is
going to include everything from the different ads that the particular user interacts
with, all the way to their purchasing behavior on some of the other online marketplaces.
Essentially, the AI that REX uses is going to produce a much better client than a human
can.
Artificial Intelligence Prevents Budget Overrun
When it comes to the construction of real estate, it is going to be one of the main
reasons for budget overrun. For example, the Sydney Opera House in Australia was built
at 70 million US dollars (which equals 1,357%), in overbudget. While this is going to be
an extreme case of budget overrun, it has been estimated that most large construction
real estate problems are typically going to be completed with their planned budget being
exceeded by more than 80%.
A California-based company named Doxel is going to use robotics to solve this problem.
The company can use AI that captures 3D images of the potential construction sites. It
will then use an algorithm to analyze the data that it has accumulated, turning it into
some very valuable insights. This insight is then used by the property managers to react
to the different ongoing issues that the real estate site is experiencing. This process
has been so effective, that it has been able to not only eliminate budget overrun
altogether, but it has also been able to save up to 11% of a potentially planned budget.
Artificial Intelligence is the Future of Real Estate
With all of the different data that is produced in real estate, it is going to be AI's
penetration into the industry that comes as no surprise. With that being said, it is
going to be a very long road before AI is ever seen adopted at scale. While many
different real estate companies are beginning to progress towards using AI for better
data sets, until it is fully integrated, most of the data that is accumulated is going
to lack standardization and remain siloed.
The real estate companies that value the more unconventional metrics, like how close a
house is to the nearest Starbucks, will be able to utilize the AI-powered tools giving
them this information. This means that they are going to be able to stay ahead of the
competition. Essentially, AI can give those industry professionals a much larger picture
and the ability to assess a particular properties' future value, opportunities, and
risks with a precision level that has never been attainable before.
Artificial Intelligence and Your Home Value Estimate: Is the Future Already Here?
When it comes to selling your home, there are going to be several different factors that
are all happening at the same time. These are going to include financing, different
sales listings, any type of investment analysis, getting property insurance, and even
taxation. With all of these different phases of purchasing real estate, the one of them
that is going to have the biggest impact on the potential buyer’s decision to purchase
the property or not, is going to be the asking or the purchase price. This means that
your home value estimate is going to need to be attractive to your potential buyer, but
also one that you are comfortable with at the very same time.
Luckily, however, artificial intelligence (AI) has been making some very large strides
in the home valuation field.
Here is everything that you need to know about your home value estimate and how AI is
changing how it’s done.
How Exactly is a Home Value Estimate Made?
If you are looking to have your home appraised, it is going to be a very difficult
process, since every single property is going to be different and have its own unique
features. These can include things such as the location of the house, the floorplan, how
large the lot is, and any amenities that the house is going to come with. As if that
weren’t enough, you also need to factor in any specific real estate market concepts such
as the amount of supply and demand there is for houses in a particular area or region.
If there are too many houses available and not enough buyers, the value estimate is
going to go down. If the opposite is true and there are more buyers than sellers, the
value estimate will go up. Here are the basic valuation concepts that are going to play
the largest part in your home valuation estimate.
Basic Concepts of Home Valuation
If you wanted to get technical about it, the value of a property is going to be defined
as the current worth of any future benefits that may arise from owning the property.
Unlike many of the different consumer goods that will be used quickly, one of the main
benefits of owning real estate is going to be realized over a longer period. This means
that your home’s value estimate is going to consider social and economic trends, as well
as any kind of governmental regulations or controls, and environmental conditions that
have the potential to influence one of the four elements of value. These four elements
are going to be:
Demand: the need or desire to own a home in a particular area that is going to be
supported by the necessary financial means to fulfill that desire
Utility: the properties ability to satisfy any needs or desires that the future owner
may have
Scarcity: the number of other properties in the same area that are available to
potential buyers
Transferability: how easy it is going to be to transfer all of the ownership rights
Now you may be thinking to yourself that your home is worth tons and tons of money.
However, the value of your real estate is not going to necessarily be equal (or even
close for that matter) to the actual cost or price.
The main difference between value and cost is going to be that the cost refers to the
number of actual expenditures, such as labor or materials. The price, on the other hand,
is going to be the amount that somebody is willing to pay for something. Now keep in
mind that both cost and price are going to affect the value, they are not going to
determine the value.
For example, say that the sales price of a house is $250,000, but the value of the house
could be much higher or much lower. This can happen if you have a new owner that has
discovered some type of serious flaw in the home, such as the foundation is faulty. This
will make the value of that house potentially lower than the price of it.
Your Home Market Value
When you have your house appraised, it is essentially going to be an estimate or opinion
regarding the actual value of the property at a specific date. An appraisal report is
going to be used by just about anybody that is trying to decide on a real estate
transaction. The ultimate goal of the appraisal is going to be determining what a
particular property’s market value is, which is essentially going to be the most
probable price that the house will be able to sell for in an open and competitive
market.
The market price of your home, which is the price the property sells at, is not always
going to necessarily reflect the market value. For example, if you are selling your
house due to the threat of foreclosure, there is a very good chance that the property is
going to sell at a rate that is below its market value.
Home Value Appraisal Methods
To correctly appraise a home, it is going to require the methodical collection of
different types of data. Data including all of the details of the property, as well as
more generalized data such as the region, city, and even the neighborhood where the
property is located, will all need to be collected and then analyzed to get an estimate
of the value. To do this, there are going to be three main methods that will be used.
The Sales Comparison Approach
This method is normally going to be used in appraising land and single-family homes.
Often referred to as the ‘market data approach’, it is going to be an estimate of value
that has been derived by comparing the current property with any other properties that
had similar characteristics in the area, that were recently sold. These similar homes
are going to be considered ‘comparable’. Using this method will require a minimum of
three or four similar properties that have sold recently, the most important factors
being the size, any comparable features, and the location.
The Cost Approach Method
The cost approach method of appraisal is used to estimate what the value of a particular
property maybe if it has been improved upon, for example, a remodel. This is going to be
a method that requires separate estimates of value for both the land and the house. The
two estimates will then be added together to calculate the entire property’s value. This
method is going to assume that a potential buyer will not spend any more than the price
of buying a similar piece of land and building a comparable house on it.
This method is going to be more common when it comes to homes and buildings that are not
frequently sold.
The Income Capitalization Method
This method is going to mainly be used to assess any property values that come with
potential income potential. This can include an office or apartment building that is
going to have several different tenants, as well as any single or double family houses
that have extra rentable space. With the income capitalization method of appraisal, the
appraiser will evaluate any income potential that the property may have.
Now that you are familiar with the different types of home value estimates and all of
the data that is required, you can see that it is a lot of work to estimate the value of
a property. On top of that, since it is going to be a person that is factoring in all of
the different data, there is always going to be the possibility that mistakes and errors
will be made by them. However, with the incorporation of AI, the number of mistakes and
errors that are made will be reduced, as well as the entire appraisal process will no
longer take as much time to do.
Artificial Intelligence for Home Value Estimates
When you combine CRM (customer relationship management) and any marketplace data, the AI
is going to be able to help brokers and agents to better predict what the future value
of a particular property will be in a specific marketplace. For example, the AI system
can synthesize information that it has taken in from a wide variety of different
sources, some of those including the amount of crime in an area, transpiration, how good
the schools are, and the amount of marketplace activity.
Since most people buying houses are going to see their new home as a type of investment,
the AI technology will be able to provide them with a much more reliable forecast of the
future value that the house will have. This means that the buyer and the seller will
both be able to make a much more confident decision about the value that the home has
moving forward.
There is no limit to how effective and accurate AI can be when it comes to predicting
the value of a property. In fact, there is a startup that is working on a particular
type of AI that can precisely predict the amount of future rent, identify the different
future market anomalies and trends, and even capture arbitrage that may be between the
asking and market price of a property, as it compares upwards of 10,000 different
property attributes that go back as far as 50 years.
AI is changing the way that homes and properties are being appraised, and for the
better. They are not only able to give more accurate appraisals, but the number of
errors potentially made will be reduced as well. There is no telling how accurate AI
will be able to price your home value estimate, but the technology is here for you.
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