AVMs and online computer models
Lenders using Automated Valuation Models (AVMs) and homeowners using "free online home values" to determine the value of a property need to know what those results aren't telling them and how the results may in fact be damaging to home values.
When you use an AVM or free online service, you may risk a much lower value than reality. Since online AVMs have become a popular way for consumers to look up home values it can be damaging to a seller if the prospective buyer looks up a much lower AVM value than the sellers asking price. The sellers asking price is based on the sellers agents CMA or a recent appraisal. The buyers offer may be based on a low AVM. This could be negatively stigmatizing the homes potential selling price. Buying a home is typically one of the most important financial decisions many people make. A low online AVM can create doubt in the buyers mind, have an influence on the buyers offer and become a potential deal breaker.
Is the house really there? A computer can't so much as drive by a house to see if it's actually located where it's supposed to be, has four walls and a roof, and really is a four bedroom Ranch and not a one bedroom shack, has it burned down or suffered a loss due to natural events such as earthquakes, landslides, hurricanes, floods, ect.. This is the most simple of criteria for value to have any basis.
Computers can not account for the vast majority of value related features. So a computer returns an estimated value of $275,000. Did it account for the sewage treatment station next door? The railroad tracks nearby with dual rail tracks that run all night? The school district? The desirability of its quiet street versus a busy street ? Interior upgrades and remodeling completed? Room additions added? tillable acreage versus wooded acres? encroachments? Easements? Water frontage properties? a great mountain view or private lot with park like setting? Many of the critical features related to your homes value are not included with AVMs. A high online AVM is also possible and typical with more complex properties.
Are the comparable sales really comparable? A computer might compare your subject property to another property with somewhat similar square footage sold three months ago a quarter of a mile away. Even if that "comparable" property is in a different, less or more desirable school district, fronts a four-lane, 55 M.P.H. street, is flood-prone, or is not the same style or construction quality. Also the computer may not know even if the property was sold under duress, such as in a divorce situation, or not at arm's length, such as to a family member, or sold as a foreclosure with seller paid concessions, . A computer simply does not know all the adjustments that might need to be made to a "comparable" property's sales price since the computer does not really know the subject data or the comparable sales transaction details. The AVMs lack of knowledge of the subject implies uninformed guesses of the comparable sales.
What qualifications, designations, experience and education the preparer of the value has. When you work with an appraiser, you can be confident we're highly qualified, ethical , prepared and knowledgeable in your market area to complete your assignment professionally and with good judgment. Most of the time, you don't know the qualifications of whoever is behind those free online values, and they couldn't compare to an appraiser's if you did. And if you're relying on a free automated valuation, you're cheating yourself out of an appraiser's education, experience, expertise and most importantly an accurate and reliable home value estimate.
Protect your investment. It can not be emphasized enough to hire a qualified Licensed or Certified real estate appraiser.
Check out this link for further information www.appraisercentral.com/AVMS
