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What the Heck is AVM?

Have you heard the term AVM and thought, ”What’s that?” Automatic Valuation Model. It is what the 'popular' sites like Zillow, Trulia and others use, to try to show you market value.

They are taking data and analyzing the market based on the data that they receive from syndicated sites, home owners and other professionals to populate their algorithms to then give a value for your home.

This sounds great and very efficient but they are forgetting or leaving out very important reasons that can estimate the value of your home by hundreds of thousands of dollars in the wrong way.

I will use our home as an example. We have a great home and when we get AVM emails or bots that find us on social media, it shares that our house is worth:

As you can see they estimate that it is worth $612,265. That is amazing! But when you analyze the market and look at comparable like a professional and not an equation, you see that their numbers are off, because they are assuming some key items:

  • All houses are the same

  • Square footage is the major determining factor when it comes to pricing

  • It doesn’t matter if it is a 3 bedroom or 5 bedroom home

  • Nothing is mentioned about interior features from one house to another and how the market value differs

  • No mention of adjustments for number of bathrooms

  • No adjustments to value based on whether a house is fully updated or not

  • No adjustments for size of yard or extensive landscaping

I could keep this list running for a while, but I think you get the point. It is a very generic way to value homes. But consumers, due to clever marketing, make it seem that this is the market value and you now know more about pricing than a Realtor. If it did do that we would have been out of the market 20 years ago when these marketing companies started up.

In the example I gave above the market value is closer to $799,900 due to all of the updates, size and local market conditions and local. If I did not have that knowledge and went to sell this house myself, I could lose out on $170,000 in value by trusting these online sources.

We don’t dislike them but know what they really are. Marketing companies. They do a wonderful job with marketing and the data they collect from syndicates like all the city, and county data, MLS data( that Realtors give for free...not sure why) and other consumer directed input.

They then sell your information to Realtors and agents to help you buy or sell real estate. They earn money from agents and Realtors to pay for those leads. This is their business. They are a marketing and lead generation company, not a home values and home selling company.

It always is best to ask a local expert, who knows the local market and local ways that impact value in your neighborhood. Not an AVM!


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