Automated appraisals, also called “desktop” or “drive-by” appraisals, are becoming more common in the real estate industry. This method of determining a property’s value employs computer models and algorithms. That takes into account recent home sales in the region, the home’s condition, size, and features.
Even though automated appraisals can be faster and cheaper than traditional appraisals done in person. buyers, sellers, and lenders should be aware of a number of risks that come with them.
One of the biggest risks of automated appraisals is that they could be wrong. Algorithms can estimate the value of a home based on a number of factors, but they may not be able to take into account everything about a property or its local market. For example, a computer model might not be able to accurately judge the interior or exterior condition of a property, or it might not know about recent changes in the neighborhood that could affect home values.
Another risk of automated evaluations is that they might not be fair. A computerized appraisal system is only as good as the information it receives. If the information used to make the evaluation isn’t complete. Or is biased in some way, the evaluation may be wrong or unfair.
For example, if an automated appraisal system relies heavily on data from a certain ZIP code or neighborhood. It may undervalue properties in other areas. In the same way, if the system only uses data from a certain time period. It might not take into account changes in the market that have happened more recently and could affect home values.
Lastly, in some situations, automated evaluations might not be as accurate as traditional evaluations done in person. For example, if a property is unique or has features that aren’t common in the area. An automated appraisal might not be able to figure out how much it’s worth.
In the end, automated appraisals can be helpful for buyers, sellers, and lenders in some situations, but they also have a number of risks that should be carefully thought through. For important transactions or properties, it may be worth spending money on a traditional, in-person appraisal to get the most accurate value possible.