WHAT IS AN AUTOMATED HOME VALUATION?
No doubt about it, the Internet has completely changed the way we live and work. There is an abundance of information (sometimes too much!) on any topic you can imagine. The world of real estate is no different.With more than 90% of home buyers now beginning their search online, real estate websites like Zillow and Realtor.com abound. These allow sellers to post their listings and buyers to browse for free.
But some are going further than simply posting or browsing and are using the Internet to actually price their homes with a tool called AVM (“automated valuation model.”). This tool uses a complex algorithm to pull data from extensive public records (such as recent sales and property tax assessments) in order to offer an estimate of a home’s value.
But is this really a good idea?
Any realtor will tell you that pricing a home correctly is actually a complicated process, which takes into account many factors. Buyer motivation, recent renovations, and recent neglect all have an impact on the listing price. But none of these factors are conveyed in the public data utilized by automated valuations. In fact, some research has found that Zillow’s online “Zestimate” tool is within 5% of a home’s correct value less than half the time. Even the Zillow website includes a disclaimer, stating that it has a median error rate of 6.1%, depending on available data for that area.
SO HOW CAN I GET AN ACCURATE PRICE?
AVM estimates (such as the one here) are useful for quick information or to get a general ballpark idea of what a home might be worth. But this valuation should not take the place of an appraisal or the knowledge of a skilled realtor. A real estate agent can get an accurate picture of all the complex elements that go into the pricing process. He or she will understand the value of a recently remodeled kitchen or a neglected yard in a way that an online algorithm cannot.
Accurate pricing is a crucial element of the decision-making process for buyers and sellers. As a seller, an inaccurate price can cause you to lose valuable marketing time. As a buyer, you cannot negotiate effectively with an inaccurate price, and this may cause you to lose out on great opportunities. Real estate agents spend a lot of time formulating accurate prices. In fact, their livelihood depends on it. Your agent will also have knowledge of your particular wants and needs when it comes to buying or selling, which will also influence the sale price.
The process of pricing a home is complex and important. Trust a professional to do this work for you rather than the whims of an online algorithm.