In Inman’s two part article Zillow enters crowded space and Real estate values need human interpretation the articles conclude:
The challenge with relying on computers to establish value is the difference between stagnant data that exists in a database and knowledge that relies on human experience and complex thought processes. In the book “Social Life of Information,” John Seely Brown and Paul Duguid make exactly this point. A computer relies on information. When it comes to real estate, this means the property’s features, including bedroom-bath count, lot size and floor plan. Even when two properties have identical floor plans, one may sell for more because of the beautiful landscaping, the privacy, or some other factor the computer cannot access. The value of these features is often more intuitive rather than quantitative. As such, computers may estimate values, but the estimates will continue to be flawed because there is no scientific way to value these other factors.
In other words, appraisers are needed to bridge the gap between raw data and subtle nuances within a property or market that are not picked up in the data.
Tags: Zillow, Soapbox Blog, Appraisal Process