The pros and cons of AI home valuation

Can AI provide a quick – and cheap – valuation of your property? The experts are unanimous: it certainly can. But whether or not it’s going to be anywhere near accurate is another matter entirely.

“Valuing property is part art and part science,” says Jarrod McCabe, Wakelin Property Advisory director. “AI can do some of the science part, but it’s not reliable when the art part comes into it or in understanding what’s happening behind the figures.

Elevate your living experience with our digital magazines

Browse Domain’s property and lifestyle magazines.

Read now

“For instance, does a home have a good ‘vibe’ as [the classic 1997 comedy] The Castle said? And was an auction result the competitive outcome of three determined bidders or only one, who happened to be the neighbour who wanted to buy the property to extend his own?”

McCabe says that AI can now deliver median prices, sale histories and demographics in seconds, but the technology has real limitations when assessing the value of a specific property, and mistakes can be extremely costly for those relying on it.

Humans can spot errors easily, for example, like a price missing all its noughts, or a house recorded with fewer bedrooms than it has, but AI often can’t. It also treats every sale as a market sale, even when it could be a parent selling to a child for a minimal sum, and has trouble assessing the higher value of a corner site to a developer compared to a mid-block site.

It’s often also impossible to accurately value a property without a physical inspection, McCabe advises. AI can’t process the smells from a nearby takeaway shop, the proximity of industrial sites, or the noise from a nearby trainline.

“Privacy, natural light, noise from driveways or bin storage, aspect and elevation,” McCabe says. “Experienced valuers know how to make such judgements; AI doesn’t.”

Peter Maloney, chief executive of valuers Herron Todd White, says tools like automated valuation models (AVMs), which use algorithms and historical data, have been used for years in the industry, but there’s nothing that can beat a certified practising valuer physically inspecting a property.

“You might have two Victorian terrace houses standing side by side, which both look the same on the outside,” Maloney says. “But one might have had a $1.5 million renovation and would be worth much more than the other, which hasn’t.

“You need a professional valuation, particularly now after the federal budget, where supply is out of the market, investors are withdrawing, prices are in decline in most capital cities, and market conditions are changing so rapidly. A true valuation has never been more important.”

AI might take the price ranges listed on real estate sites, not realising that those are buyer expectations, not valuations. And those need to be dependable enough to stand up in court if legal issues arise.

“Technology helps inform and streamline the process, but professional valuers provide the critical analysis, local market knowledge and independent assessment required to deliver a valuation clients can trust and that is defensible,” Maloney says.

At valuers and advisory firm Opteon Solutions, general manager for Australian valuations, Ross Turner, agrees that big, high-risk financial decisions should only be made with information from a trusted, qualified advisor.

“AI can be potentially more of a novelty,” he says. “When you’re dealing with rolling interest rates, the scale of challenges like the Middle East, changes to negative gearing, capital gains tax and zoning, then AI can’t pick up all the nuances of their impact on property prices.

“The investment in a professional valuation is even more vital in uncertain times.”