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  • Writer's pictureAndrea Deeds

More talk about AVM valuations

As a realtor and an appraiser, I don't want to 'beat up' on Automated Valuation Models (AVMs). They are in some cases quite accurate; and can be good 'tools'. Other times they are dismally off the real value. How many times do real estate professionals hear someone tell them "the Z word site" says my home is worth X. My assessor says my home is worth Y. (We smile and say something nice, but inside our eyes are rolling back into our skull). One day the need for appraisers may go away, but I guarantee you, we are not there yet.

What can an AVM not tell you?

  1. Whether the house is really there? An AVM didn't drive by the property in question. An AVM doesn't know in fact if it burned down yesterday, or incurred some other significant damage or stigma.

  2. Whether unique features of a property might add to or detract from market value. Did the AVM account for the sewage treatment station near by or the railroad tracks nearby with trains that blow their whistles every night? The school district? Did it account for the $50k kitchen renovation or lack thereof? The answer is rarely does it have this information or consider it.

  3. How long ago was the property was assessed. Many AVMs rely on public assessment records. In many states, assessments may only be required every three years. Many times tax records base square footage on the original builder plans (which can vary greatly from current reality). Most tax assessors in my geographic area never even go inside. Assessed value can be vastly different than current market value for a myriad number of reasons.

  4. What makes a sale comparable. An AVM might compare your subject property to another property with similar square footage sold three months ago a quarter of a mile away. Even if that "comparable" property is in a different, less desirable school district, fronts a four-lane, 55 M.P.H. street, and is flood-prone. Or even if the property was sold under duress, such as in a divorce situation, or not at arm's length, such as to a family member. An simply does not know all the adjustments that might need to be made to a "comparable" property's sales price.

  5. Whether a market is declining. Automated valuations use data from recent, nearby sales. If those sales were completed at the peak of a local housing market, the computer will think the trend is going up. Even if a professional appraiser knows that the overall neighborhood is beginning to experience a downturn.

  6. Whether there is a conflict of interest. Sometimes sales agents sell you that they can get a higher price for your property. If they tell you your property is "worth" the high end of what they believe they can sell it for, the theory goes, you're more likely to sign a listing agreement. In reality, homes that are listed for too high typically stay on the market longer than normal and typically sell ultimately lower than market value. Often this is due to an imagined 'stigma' that 'something must be wrong with that house' since it has been on the market so long.

  7. What qualifications, designations, experience and education the preparer of the value has. When you work with an appraiser, you can be confident we're highly qualified, ethical and prepared to complete your assignment professionally and with good judgment. Most of the time, you don't know the qualifications of whoever is behind those free online values, and they couldn't compare to an appraiser's if you did. If you're relying on an automated valuation, you're cheating yourself out of an appraiser's education, experience and expertise.


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