Automated Valuation Models (AVM’s) have become prominent on the internet over the past few years. As an appraiser, I have been asked many times, “Why did the appraisal come in lower (or higher) than these AVM’s?”
To give an answer to this question you must consider where all this information is coming from. For the most part, these “figures” are derived from tax records and/or Multiple Listing Services (MLS systems) and in some cases, the information used is gleaned from appraisers’ files. When accessing these services, some AVM’s give options to help narrow down the fields utilized for the calculations. Most AVM’s include your zip code, the number of bedrooms and the number of bathrooms you may have. Other AVM’s (the better ones) give you more options such as being able to limit the comparables utilized for the calculations to a specific neighborhood and take into account if a home has a basement, pool, etc. While these do help to give better value, none of these AVM’s takes into account the condition of the house, size (GLA), any additions that may or may not have been made, the size of the lot, or any of the many factors that an appraiser takes into consideration. Some of the values given by AVM’s can be off as much as 15% or $37,500 +/- on a $250,000 home. In most cases, AVM’s use all the sales found and do not consider the date of the sale (I have seen sales in excess of 2 years old used in AVM’s and we all know how the market has changed in the past 2-3 years) or if the sale was a “arms length transaction” (typical sale) or a distress sale. All these factors play a part in the determination of the most probable sale value for a home. Please remember that these AVM’s are computer models and are only are as good as the information put into the program. No computer model can replace a personal walk-through of the home and the consideration of the many factors that an appraiser takes into account when performing an appraisal.
We have all seen computer models used on TV to predict the weather and we have all seen the results of these models being wrong. The same applies for AVM’s. On my own home, these AVM’s give figures of $22,000 to $60,000 over the actual value. This is due to the AVM’s using a whole zip code area for their calculations. In my case, there have been several $500,000 to $1,000,000+ sales in my zip code area. All these sales are factored into their equations (even though my home is not worth those amounts) but I do have the same number of bedrooms and bathrooms and therefore they were included in the AVM’s resulting value for my home.
In conclusion, having an appraiser do a physical walk-through of your home and property will give the appraiser a chance to view all the different influences (good and bad) and utilize all these influences to answer the question, “What is my home worth?”
Should you have a need for an appraisal now or in the future, give us a call! We are here to help and give a realistic value of your home so that you can truly make an informed decision for your needs.
Van Purser and his wife Jeanne are a licensed Real Estate Brokers in Georgia. Since1984 they successfully purchased and renovated over 400 homes. Their expertise is in representing Buyers or Sellers as an advocate; which means always ensuring their best interest. Additionally, they represented hundreds of clients over the years as an Associate Broker with Metro Brokers, RE/Max and now with his own firm. He and his wife, Jeanne, have been married since 1977. Van or Jeanne can be reached at 770-623-3313, or by email at [email protected] or [email protected].