Differences Between a Home Value Estimator API & Appraisals
There is no disputing that a home value estimator API tool on an agent’s website can be a powerful draw for traffic, prospects and leads. In 2018, customers of Home Junction saw more than 1.1 million uses of the home value estimator tool by consumers on their websites. (Also known as an AVM – “Automated Valuation Model.”)
This feature acts like a magnet for people who want to know the answer to this simple and popular question: “How much is my home worth?” According to Google, more than 10,000 people type in this phrase or a variation of it every month on their search engine. There is an obvious interest there. Now, many agents and consumers may have some reservations on the results of a home value estimator API.
An API is a software term for “Applied Programming Interface.” The interface is basically the software that property data providers such as Home Junction offer agents so they can add the property value estimate feature to their website. Home Junction actually gathers all the data points and uses its algorithms to make the calculations.
Just like an appraisal, the home value estimate algorithm takes into account standard attributes such as the address, square footage, number of bedrooms and bathrooms, property sizes, etc. The software then makes calculations based on property records, recent sales, historical data, and other factors.
Even still, it is commonly acknowledged (or it should be) that the machine-generate estimate is not always as accurate as an in-depth comparative market analysis by a real estate professional or a full appraisal by a licensed professional appraiser.
A Home Value Estimator API Offers Instant Estimates
But that’s exactly the point, isn’t it? The home value estimates are generated quickly. People use this tool because they want a quick overview of the market.
The available data is run through a formula at a certain point in time to come up with a best guesstimate. Those estimates come with a high and low range as well, indicating the probability of variations based on the data gathered. This is what you would expect from a report on home values generated in seconds. Obviously, the property is not inspected in person, like would be found with a CMA or appraisal.
Secondly, the computer does not have the ability to inspect the condition of the property. Perhaps the roof of the garage is damaged, which would lower the value. Or maybe the kitchen was upgraded substantially, which would raise the value.
As we know, deficiencies, repairs or upgrades seen in person will influence an appraisal. In addition, there are other factors that can affect the price of a home, such as popular schools, neighborhood amenities, etc. Therefore, the savvy agent would be smart to provide this tool for quick estimates. But they need to be sure to let users know the parameters involved in how these numbers are calculated.
More importantly, this tool creates a HUGE opening for that agent. The person looking for a home value estimate is obviously a prospect, either immediate or long term. The agent can tap into that homeowner’s interest to offer a more detailed, in-person CMA of that property. For buyers, they can offer them an in-person assessment of the local housing market.
Factors Used in Creating Property Estimates
Here are some of the factors that agents can point out that are involved in creating those machine-generated estimates as opposed to the more formal personalized option. Some of those factors include:
Property Data Records
Home value estimator calculations depend on correct property data records for their calculations. As the saying goes, when you put accurate info in, you get accurate info out. If some of the information in those records is not precise, it could affect the machine-generated estimates. An address could be wrong. The square footage could be off. Etc. Etc.
Comparable Properties
Agents and appraisers use comparables to make their assessments and price projections. Computers do the same. The more similar properties that are out there, the better the results on the estimates. For example, if you have a neighborhood where all the homes are cookie cutter and very similar, then the home value estimate will have a smaller variation than an area where the homes are all different.
Which brings us to this factor – time.
Freshness of the Data
Time frames are important. If there is a neighborhood where there have been several recent closings in a relatively short period of time, the computer formula is generally able to come up with a more accurate forecast. That’s because the data is fairly current. Market conditions such as mortgage rates, economic conditions, etc. might not have changed that much in that short time frame. Conversely, if there haven’t been many sales in that area over a long period of time, there could be a wider margin of prices in the calculation.
As we said, it is still wise for many agents to focus on the opportunity that adding a home value estimator API can provide. Make it very clear, the results of the home estimator feature are estimates.
Also, when the results are presented on a website to a visitor, make an offer very clear that you can provide more in-depth, personalized information for them.
Add language such as:
“Are you interested in a more accurate in-person assessment of your property?”
“Would you like me to prepare a more formal Comparative Market Analysis and let me explain the results in person?”
“Would you like to meet with a real estate professional to discuss strategies for the pricing of your home?”
Home value estimator APIs have come a long way in recent years. Lenders consistently use them to quickly assess the value of a property. Investment companies that make remote purchases of properties basically use these calculations to formulate their offers.
It’s a powerful tool. Like any tool, it has to be used correctly. Agents would be smart to add it to their website. Make it very clear in explaining how the estimates are calculated. And as we all know, the value of a property is really only determined at the end of the day by what someone is willing to pay for it. Use this popular estimator tool to start a conversation with a prospect.
Sure, we’re in that age where computers are a dominant force in our lives. But at the same time, those computer calculations can be difficult to comprehend.
We are also in an age where even with all the software that’s out there; people still want the comfort of a personal consultation with a professional to make major decisions. Especially with decisions on the magnitude of pricing a home or making an offer on a property.
That’s where the one-on-one involvement of a real estate professional enters into the equation. Savvy agents can use this combination of the technology of a Home Value Estimator API plus their offer of personal expertise to get their clients the answers they need and want.
