If you’re selling your home, you’ve probably thought about the work that needs to be done before listing—painting, a deep clean, or yard work, for example. But have you put any thought
How Accurate Are AVMs
Websites everywhere are offering “free home values” online in an instant, but what information are they using, and are they reliable?
Let’s begin with the basics. Automated Valuation Models, or AVMs for short, are essentially online calculators that estimate a home’s value based on an algorithm and available real estate data. Most popular home search websites these days have their own formula, with their own catchy name, or have outsourced one of the third party AVM companies with proprietary formulas to display home value estimates on their websites.
Value estimates displayed by these AVMs are just that: estimates. They calculate a home’s estimated value by analyzing public tax and mortgage lien records, list prices of similar homes, user submitted information, etc. Some sources even use actual sales data from the MLS, but not all since this is confidential data only available for use by MLS members. In many states, Texas included, sales prices are not public information, so not every AVM calculator will be able to use that data. Tax records will display mortgage liens in the original loan amount, after down payments, and county value estimates that are typically lower than a home’s true market value. Some sites will allow users to add information on upgrades and condition as well. All of this data is analyzed to come up with the estimate.
What AMVs do NOT consider, however, is the condition of your home, demand in your community, the view from your windows, and local decor trends. AVMs will never set foot inside of your home, look out your windows, drive in the traffic around your neighborhood, or verify the accuracy of the upgrade information you’re providing. While they will consider nearby homes in their calculation, they won’t adjust for things like backing up to a main street, appeal of your paint colors, or what your home smells like. (Yes, smells do make a difference!)
It is important to note that AVMs are being used by newer programs that have popped up, offering to buy homes without ever stepping foot inside of them. Their offer prices are also based off of these AVM estimates.
So to answer the accuracy question… they’re as good as the data they’re analyzing, so some are better than others. See the images below to compare the value 4 estimates we got on the same house, which in our professional opinion, would likely sell for approximately $255,000 in today’s market, give or take a little. As you can see, some get it pretty close, others were pretty far off. To be fair, Zillow's wasn't bad at all, as funny as the meme is. But another was far enough over that real numbers would be pretty disappointing! It’s pretty unlikely any of them will ever be accurate enough to replace a professional appraisal or a real estate agent’s market analysis. In fact, most of them have disclaimers underneath their value estimates that advise you to contact a professional for a true valuation. A licensed professional will need to view your home, preferably in person for the most accuracy, or at least by viewing photos of every room, the exterior, and the views.
Bottom line- a computer program can’t replace the expertise of someone that knows your home and your neighborhood. You can use an AVM value estimate for things like estimating how much equity you might have, deciding when you might be able to refinance to eliminate mortgage insurance, or pure curiosity. Do not use them for decisions that require a more accurate number, like protesting property taxes or a sale or purchase offer. When you’re making real-life plans based on this information, entrust an expert.
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Lauren is a lifetime North Texas resident and graduate from Texas Woman's University. She currently lives in Prosper and has been working in and around her community for the past six years, resulting ....
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