How Accurate are AVMs? Colleen
Barry
In the last 10-15 years, MLS services have opened
listings to third-party aggregators (Zillow.com, Trulia.com,
Realtor.com, etc). These websites provide a number of
non-property-search features, from home design ideas to home value
estimates. To arrive at the value estimates, most of these sites
are using pricing systems called Automated Valuation Models or
AVMs. These are programs that use aggregated data to provide
estimates of value. The challenge is that there is an art to
pricing a home and the AVMs are falling short.
We recently conducted a market study to test the accuracy of one
AVM. What we found was alarming: the AVM values were typically
significantly higher than the homes ultimate sale price. While the
average was 6.75% over, some of the AVM values were as far over the
sale price as 28.58% or as far under as 41.01%! This was alarming
to us because some sellers try to use these AVMs to decided on a
list price for their home.
A homes list price is part of the overall strategy to position
the home for sale. If it is too far under or over the market range,
the home may not yield the highest possible ultimate sale price.
Pricing a home for sale is an art. The agent takes many things into
consideration — criteria that an AVM is simply unable to see:
condition, curb appeal, interior design, staging/furnishing,
finishes, and other characteristics that affect the overall value
of a home. These are items not currently used by the many AVMs
available to consumers.
A persons home is often his or her most valuable possession.
Therefore, we recommend hiring an experienced agent to conduct a
professional market analysis and create a strategy that will help
you achieve your goals.