HouseSigma: changing the game

Since the mainstream creation of the internet in the mid 1990’s, Realtors would use homes sales data through their systems as a lead generation system to attract clients. But today, there is HouseSigma for both real estate agents and the general public, providing fair access to information by everyone.

Those buyers can just use a mobile app from Apple or Google Play like HouseSigma to get the data points in real time- themselves.

Previously, you would go online to search for sold prices.  Inevitably, you would land on a Realtors website. For those realtors, sales data was a way to connect with potential home buyers for yesterdays Realtors. They would offer to send you recent sales data in return for your email address.

You then end up on a Realtors mailing list and receive regular updates. There’s nothing wrong with this if you agree to it- after all, you’re both getting something of value.

But now, that information is widely available through a number of apps. It could be a real estate website or HouseSigma.

These sites and apps have watered down a Realtors competitive advantage of providing “just sold” data. It means that Realtors need to find other ways to engage clients or show value.

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Toronto Real Estate Board Releases Data

It all began in 2011, when the Competition Bureau sued the Toronto Real Estate Board (TREB).

Then, in 2016 TREB was ordered to make sold Canadian home values data available to the general public. Through a series of back and forth appeals, in 2018 the data was finally made available.

This information hurt a lot of Realtors who relied on this “under the cloak” information to get them new clients.

If someone has something that you want, it puts you in a position of power. Now, consumers had the ability to research their own data.

They could make their own decisions on what they believe is “market value”.

What is HouseSigma?

HouseSigma is very popular site in the GTA for consumers created by Joseph Zeng. It is just one of a number of sites that helps potential buyers and sellers make better decisions.

 According to their website, House Sigma “utilizes artificial intelligence technology to estimate Canadian home values in real time”. Realtors note: these numbers are to be used as a guide. However, we’ve seen them be dramatically wrong on some of our listings. Ultimately, apps can’t take into consideration some of the key elements of the home buying process:

  • buyers emotion for a specific home after seeing it
  • buyers desire to be in a very specific location or a very specific price
  • buyer has unique features of a home that only this home provides
  • a smell of a home (believe it or not, this is a key factor in the home buying process)

Buyers can obtain an estimated home valuation and identify similar nearby sold listings, to help when determining their final offer price!”.

You don’t need a credit card, there is no monthly fee.

The CBC News also posted an article in 2017 on HouseSigma. It was indicating sales data is “What buyers and Sellers have been looking for: Sold prices for Toronto Homes now online after court ruling”.

As Guelph Realtors, our jobs are to evolve into what customers and clients need, not what WE think they need.

How accurate is HouseSigma Estimated Price?

Like any prediction, it’s not guaranteed. We’ve used our own listings as benchmarks to see how accurate HouseSigma was and in some cases they were within 1% of being correct. However, in some cases they were wildly inaccurate.

It was much easier for HouseSigma to guess a seller’s market price in Q1 2022 when everything was selling at least 10% over asking with real estate bidding wars.

But as property values started to decline, the error rate on HouseSigma increased. We believe this is because it was using lagging indicator data. As in, it was trailing behind what the market was actually doing.

The other issue is that HouseSigma can’t take into account a sellers listing strategy. The list price of a home where the seller is holding offers is much different than one where there is simply an irrevocable.

In our current balanced market, it’s even more difficult to predict what will happen with a sale. This is because there is more negotiation. As mentioned earlier, emotion can’t be factored into an algorithm and sale prices aren’t just always a mathematical equation.

Downside of HouseSigma AI

This sort of artificial intelligence is great for using sold data to compare different aspects of a home based purely on date.

But buying a house in Guelph is so much more than that. Buying a home is a very personal experience.

New cabinetry or paint colours are not captured with artificial intelligence.

These home buying apps (HouseSigma, Zillow, Redfin, Zolo etc) help people find, research and estimate sale prices or trends within areas. They compile the same information that Realtors have access to, in different formats. Sometimes these sites can create what’s known as “paralysis by analysis”.

There’s a fine line between basing decisions on facts and figures. You cannot just plug a certain number of bedrooms into an app and assume this is the market value based on the real estate listings it provides back.

How do REALTORS® feel about HouseSigma?

We’ve never believed in providing Guelph homes sales data in return for your information. In fact, if you want it just get in touch and we’ll send you what you want!

These online property search tools also put pressure on Realtors and real estate boards to improve their game- which, frankly is a good thing. We encourage our clients to use these sites to come up with their own conclusions. But, then call us after you’ve done that and we’ll validate what you’ve determined and guide you in the right direction.

This includes market prices, sold data and neighbourhood trends. The more educated a consumer is, the better decisions they will make.

What’s the role of a REALTOR®?

The role of a Realtor is not (and should never be) an order taker, or comparable provider like HouseSigma. The role of a Realtor should be:

  • an advisor- to advise clients on the right pricing strategy, the right time of years to sell a house, the right price to offer on a house
  • a marketer- to ensure that they have a proper real estate marketing mix and promote your home effectively
  • a negotiator- ensuring that they’re working to get you the best deal, whether you’re a buyer or seller
  • to provide you the ins/ outs of a real estate contract and ensure that you have protected yourself legally- someone to explain common real estate terms
  • providing you added value services such as home staging, high end photos and photography, negotiation skills, effective local relationships
  • to provide specific local nuances like proximity to the best restaurants in Guelph, parks in Guelph and even things to do in Guelph.

These opinions are not something an app can provide as easily, especially when you aren’t familiar with the market.

Beth and Ryan Waller are Guelph Real Estate Agents. Get in touch!