The property valuation is the real estate transaction beginning and one of the most complex parts to carry out for professionals. So many factors intervene in this part, and currently, there is not enough technology to take into account all these variables. The result is that we do not have a technology that can give us the real property value to start the transaction path.

More and more proptech companies are indeed arising in the proptech market, capable of offering more data. Therefore, the theoretical value of the property is increasingly closer to the one that should serve as a starting point. 

But let’s see which data these proptech companies currently use, through their valuation software: 

  • Comparables: all these startups have an inexhaustible source of market data approach; it is an estimate of value derived by comparing a property with recently sold properties with similar characteristics. They extract this data from the internet, from portals, or doing scraping; in this way, they collect all the data on real estate published on the internet.
  • Geographic Data: These companies offer geographic data, taking into consideration the properties and the comparables locations used to assess it, geolocating them, and, therefore, being able to offer one more layer of data. 
  • Services Data: once we can geolocate the property, we can offer all kinds of data related to all the services that exist around it, such as public transport, shops, schools, hospitals, and leisure. The amount of data to offer is enormous.
  • Real Operations Data: for a few years now, both the College of Registrars and the Notaries in Spain provide all the real estate operations data. They also geo-positioned the properties. These real transaction data are the most reliable. However, they have to perform a normalization task, eliminating the unrelated data, so the final result has no distortions. 

However, the data algorithms still depend on some information that must be provided by humans. So, errors occur in their evaluations. For example:

  • The maintenance conditions: the conservation status is essential to know the property valuation or to be able to compare the property with others around it. The investment in the improvement or maintenance could be relevant information on the value. Still, this information is very subjective if it is carried out by a human being. For one person, a property may be right; for another, it can be necessary to make some improvements to the kitchen or the bathroom. 
  • The neighborhood: How can an algorithm know the “quality” of a community? How can an algorithm know if there are tourist apartments for rent in that building? It changes a lot of a situation for the buyer (depending on the purpose of the purchase, of course). If you know that your future neighbors are tourists (in Barcelona happens a lot) has negative consequences on the price. On the other side, you will be able to pay differently if your neighbors are a local community. 

Once reviewed, some of the variables that make an algorithm of valuation, better or worse, we can only hope that proptech helps eliminate all the variables that remain on human hands, with the consequent improvement in the precision of property valuations.

Gustavo López

Operations Director at the Real Estate Agents Association in Catalonia.