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Computerized Home Valuations

Posted on Feb 20, 2017 by in Uncategorized | 0 comments

Homeowners are often looking online to see what the value of their home is.  Everyone is curious about value and how it might be changing and an estimate of the value of their home.   It may be from an AVM (Automated Valuation Module) on a Broker’s website, an estimated value from Realtor.com, or a Zestimate from Zillow.  All of these are an estimated of the value of a home by a computer program, known in the industry as an AVM.  AVMs were initially developed for use by large financial institutions to value large portfolios of loans, and with working with large numbers, the individual errors in valuation don’t matter much.

How accurate are AVMs?  The “gold standard” for an AVM is to be within 10% of a home’s actual value 90% of the time.  Most valuations you see online are in the low 80 percent range.  To illustrate how this works, say the property is worth $300,000.  The best of the computerized valuations would show an estimated value of between $270,000 and $330,000, 90 percent of the time.  The other 10% of the time they would be outside that $60,000 range.  Not very accurate!

“But it is on the internet, it must be true.”  Well, not really.  First of all, the computer hasn’t seen the home.  Properties vary greatly due to upgrades, condition (good or bad), functionality, and features.  The computer is getting its information mainly from public records.  Even if a person has the ability to change some of the inputs, do you really know the local market and what buyers are looking for and what they will pay for things?

The program then compares the home to other properties that have sold in the area.  Here again, the computer hasn’t seen these homes either, nor can it make judgements like a local expert could.  The more variation there is in an area, the less accurate the valuation, because the computer doesn’t know the individual neighborhoods or the variation in housing.  The value may be more accurate if the home is in a larger subdivision of very similar homes, but it still can’t know specifics about location, buyer or seller motivation and local market conditions.

The bottom line is that while and AVM may give you a general idea of the value, you need a knowledgeable, experienced Realtor to look at your home, evaluate comparable sales and the overall market in order to have an accurate price.  Have fun looking at online values, but don’t make decisions based on them.

Greg Zadel, CRS, CRB, GRI, ePro

Zadel Realty

8110 WCR 13 S-4  Firestone, CO.  80504

office. 303-833-3012 | fax. 303-833-3054

Greg@ZadelRealty.com

2011 Realtor of the Year, Colorado Association of Realtors

2008 President, Colorado Association of Realtors

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