With the advancement of tech-based real estate services such as Zillow, Realtor.com, Redfin and others, customers can easily research and estimate the value of their homes without involving a Realtor. The big question is, how accurate are they?
Property valuations are the most integral part of a real estate agent’s business. You may find, or already use, easy and quick ways to determine property values. One such method is using an automated valuation model, or AVM. With so many options available, you will want to know how an AVM can benefit you and who the top providers are.
What exactly is a real estate AVM?
A real estate automated valuation model is a machine learning-based system that examines various data points to determine the worth of a particular property.
The information examined often includes details of the property, comparable sales data, the property’s age, market trends and more. There are many available real estate AVMs on the market. Zillow’s “Zestimate” is the most popular.
Zestimate is a key feature offered by Zillow and one of the first AVMs made available to the general public. When introduced, it caused some controversy, particularly among real estate agents. However, the Zestimate is so prevalent in clients’ minds that agents frequently intentionally bring it up during their listing presentations, detailing why it is either high or low or, perhaps, exactly right.
Zestimate pros and cons
The main benefit of Zestimate is that it gives users a basic idea of the value of their homes. On the other hand, Zillow’s estimates frequently rely on data submitted by users; as such, they can only be as reliable as the information given to them. Users’ errors or omissions can jeopardize the accuracy of the data.
Other common real estate AVMs: Realtor.com’s AVM; Trulia’s AVM; CoreLogic RealAVM; House Canary; Realtor Property Resource (RPR); Homesnap; Freddie Mac Home Value Explorer; ATTOM Data Solutions; Collateral Analytics (Black Knight); Veros; Quantarium (Xome); Clear Capital.
AVMs are always estimates — they will never compare to a CMA
AVMs should not be used to give a home’s final value. They only provide estimates and can be misleading. Any AVM should be described as an estimate. Most of the commercial sites use them as a catalyst, not a stand-in, to encourage website visitors to contact one of their subscribed agents and to sell the leads. This is one of the many ways they make their money. AVM estimates are not intended to take the place of a more thorough property evaluation that involves an in-home inspection and a detailed comparative market analysis (CMA) from an experienced agent.
Actually, AVMs are a starting point when determining values that you, as a Realtor, will be able to use to establish yourself as an expert in your area for pricing and win more business.
I recommend that you use two to three of them when doing listing presentations so that you can show the homeowner how these AVMs can vary in their valuations and then take another step to show a more detailed CMA (Comparative Market Analysis) that factors in details like home improvements, functional obsolescence, desirable/undesirable lot, etc. This is especially important in areas that are not homogenized like large cities where AVMs often use a condo as a comparison for a single-family home which can really skew the numbers.
Three good AVMs to consider:
1. Realtor Property Resource (RPR)
RPR is a free online tool that helps Realtors estimate a home’s value based on the property’s features, renovations and the housing market. This tool can also assist consumers in deciding whether it is cost-effective to buy a house and later remodel it.
Realtors can use the report obtained to educate prospective buyers and sellers regarding what the local market offers, which helps set reasonable goals. So far, there are no significant pitfalls, but it needs to be updated often for easy navigation.
2. CoreLogic RealAVM
RealAVM is one of CoreLogic’s efficient and easy-to-use products. It provides the first glimpse at recent house price movements, providing an initial baseline for appropriately valuing collateral (and mortgage risk).
The RealAVM is just one component of the property information sheet for real estate agents using CoreLogic’s Realist software; it is not a consumer-facing AVM but a great tool to use for determining value.
3. ATTOM Data Solutions
ATTOM is a trustworthy source for reliable, nationwide real estate data. It offers analytics-ready data for real-world applications with flexible delivery solutions like ATTOM Cloud and one of the market’s top real estate data APIs.
Your individual needs, opportunities and goals will be met by ATTOM’s adaptable property data delivery solutions. Through a range of delivery methods, ATTOM Data can quickly establish data management processes and address your real estate data needs.
Major AVM providers highlight their precision, thoroughness and time-saving abilities. But AVMs work with averages. They are, therefore, instrumental in areas with fairly uniform property stock. On the other hand, they might not be as precise or helpful in areas with a wider variety of homes.
While their use is expanding, AVMs have not replaced human valuation estimates and will never compete with a Realtor-made CMA. Take advantage of these useful information resources, but then show your value as an expert real estate home evaluator with detailed and accurate pricing derived from your CMA. You will impress your clients and boost their confidence in you. This will win you listings and attract more buyers as you become their trusted Realtor. More listings and more buyers means a better bottom line!
Anne Ewasko is a veteran Realtor in the Chicago area and a longtime techie. Visit her at anne.luxhomechicago.com.