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.