Price Me Now Players Know Best
The concept of the “wisdom of the crowds” popularized by James Surowiecki in his book Wisdom of the Crowds sets forth that the aggregation of information in groups, results in decisions that are often better than could have been made by any single member of the group.
We put the concept to the test once we launched our initial game, Price Me Now, in the Oakland/Berkeley portion of the San Francisco Bay Area. We developed a pricing algorithm that addressed the unique aspects of real estate – that is, real estate is hyper local. You might be good at pricing one market, but know little about values in another.
Once the sales data started to flow in, we ran the player home price estimates through the Realius Pricing Opinon (RPO) algorithm and compared the results to the actual sales price of a sample of homes to see how good our algorithm could predict the true value of a home. We compared the RPO results to other prices – the list price, automated valuation model (AVM) prices and the simple average of the player price estimates.
We found that the moves submitted by the community playing the Price Me Now game, when run through the RPO, was on average 24% better at estimating final sales price then the List Price, 116% better than a public AVM and 260% better than the simple average.
These are early, yet promising results. We are continuing to test the algorithm with more data and actual sales. Stay tuned for more results. Better yet, jump into the game test your pricing prowess and be part of the best real estate pricing community.
We know we are not the first to apply wisdom of the crowds to real estate. Joel over at Future of Real Estate Marketing covered the debut of MyCurrency last year.
The twist that we have taken is to provide excellent information about the home and the market so that the players are educated when they make their guess. We also put some sport into the process by suppressing the list price until you make your guess. We do think that our game paradigm is great way to let real estate players have fun, learn the market and show off their real estate IQ.