How AI Can Help You Find Undervalued Real Estate

In the real estate investment world, return on investment is king. And nothing provides more potential return than undervalued real estate.

But the real estate industry is also oversaturated with buyers. How can you find these diamonds in the rough? 

You might be surprised at the answer: AI! Artificial intelligence tools can be valuable in helping you find properties that are selling below their market value. Let’s explore some tools, as well as a few “old school” ways to find undervalued real estate.

What is Undervalued Real Estate?

Undervalued real estate refers to property (residential, commercial, or land) that is being sold below its market value. The property could be worth more than what it is currently selling for, based on its condition, income potential, or comparable properties in the same area.

Why Are Some Properties Undervalued?

You might be suspicious of a property that’s being sold below market value, but there are often valid reasons for being undervalued.

It may simply be an instance of poor marketing or visibility. If a picture paints a thousand words, what does a real estate listing with bad photos do? That’s right; it prevents it from being sold. 

In some cases, a property is “for sale by owner” (FSBO). And while the owner might want to avoid paying an agent’s commission, he might also struggle to market the listing in the right places. That means the property could sit on the market for a while, causing him to drop the price in desperation to sell.

A seller motivated to sell quickly due to relocation, financial difficulties, or an inheritance may list the property below market value. 

The property may also have easily fixable cosmetic issues that reduce the selling price. Often, you can put a small investment into such a property by updating the interiors or landscaping.

There are also distressed situations, such as foreclosures, short sales, or probate sales, where properties are often listed below market value.

And then there are market inefficiencies, which occur when certain neighborhoods or areas are overlooked by investors, despite growing demand. Their loss, your win!

How AI Can Help

You can sift through dozens or even hundreds of property listings online yourself, but why would you when there’s help? Artificial intelligence tools can process millions of data points, sift through listings, and find listings that match your criteria, a lot faster than you could manually.

AI can also connect the dots you might miss. For example, AI might flag an undervalued property in an area where the construction of a shopping center has just been announced.  The seller might not even be aware that the value of his property is about to skyrocket, but AI recognized the property as one with huge potential, enabling you to snag it for a fraction of what it will be worth in a few years.

AI can also identify neighborhoods that are on the rise. For example, a neighborhood may have had a bad reputation for crime and poverty in the past, but if that has changed, prices may not yet reflect the improvement. AI can scan news articles, social media, and announcements for new business to determine if a neighborhood is on its way to a better, safer future. That way, you can invest in property in an area that will soon be highly sought after.

AI Tools to Try

Expect to see more resources for tracking real estate opportunities in the future, as this field is only just starting to blossom. 

Skipify.ai

Skipify.ai  is geared toward real estate professionals. It identifies patterns you might miss. For example, it might show a home that has been relisted several times, which is now listed at a lower price. It can also read listing photos to identify whether the bathroom or kitchen has been upgraded, which may increase the property’s value.

Propstream

Propstream provides up-to-date real estate data on 160M+ properties nationwide, which you can customize with more than 165 filters. It also offers advanced real estate Comparables and Nearby Listings, powered by public records and MLS data.

HouseCanary

HouseCanary provides accurate property data, valuations, CMAs, market forecasts, and AI-driven analytics that help you identify potential undervalued properties. It’s geared toward real estate investors, brokers, lenders, and appraisers looking for residential properties.

Skyline AI

Skyline’s enterprise-grade solution for commercial real estate investors leverages more than 40 years of historical data and machine learning to forecast property performance 12-24 months ahead. It can identify undervalued assets with up to 92% predictive accuracy.

DealWorthIt

DealWorthIt’s AI technology helps you identify both on- and off-market properties, including single-family, multifamily, and commercial. It helps uncover under-market-value deals by quickly analyzing sales history, ownership, and rental trends.

For an Old-School Approach

While technology can be a real boon in helping you process thousands of listings without manually searching through them, you may want to consider adding old-school strategies to your hunt. 

Foreclosures

When a property owner defaults on their mortgage, the bank or lender can reclaim the property and sell it (often at a discount) to recover the debt. This is your opportunity to buy an undervalued property. You may, however, need to put some work into the property to make it liveable or sellable. Some places you may find foreclosures include:

• County courthouse auctions
• Bank websites
• Foreclosure listing sites
• Local real estate agents

Walk the Neighborhood

You can’t get more analog than this! Explore the neighborhood you’re interested in. Look for "For Sale" signs for properties that aren’t listed online. Also, pay attention to properties that look neglected or poorly maintained.  You might be surprised at the results of knocking on a few doors and asking if the owners would consider selling!

Build Relationships

By simply getting to know the people in a community, you might stumble upon a great investment opportunity. As you build relationships, you may uncover the fact that someone who owns a large warehouse is thinking about selling. If you’ve built trust within the community, you might get first dibs at a great price for the property.

Go to Auctions

Sometimes foreclosed homes are auctioned by the court or sheriff. These properties may be advertised in the local newspaper or on the county website. If you buy a property, you may need to make the full cash payment within 24-48 hours, and you may not have the opportunity to inspect the property beforehand. Still, auctions provide a great opportunity to find undervalued real estate.

Look up Public Records

Spending a few hours in your local county clerk’s office could help you find real estate investment opportunities. Look for:

• Pre-foreclosure notices
• Tax delinquency lists
• Probate records
• Code violations

Each of these provides an opportunity to approach the homeowner (or heirs) to offer to buy the property at a discount. That way, they avoid the legal nightmare they’re headed for, and you get a property below market value.

Undervalued real estate provides you with a great opportunity to increase your return on investment. And while old school tactics can get results, AI can help you find properties even faster. Consider trying out both methods to cast the widest net possible.