7 things an automated or non-appraiser valuation won't tell you

Lenders and brokers 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.

  1. Whether the house is 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 split level and not a one bedroom shack.


  2. Whether unique features of a property might add to or detract from market value. So a computer returns an estimated value of $150,000. Did it account for the sewage treatment station next door? The railroad tracks nearby with trains that blow their whistles every night? The school district? The desirability of its tree-lined street versus the next street over?


  3. How long ago the property was assessed. Many AVMs and free online services rely on public assessment records. In many states, for example, assessments may only be required every three years — the value may be nearly three years old in that case. Some states mandate that an assessed value not increase beyond a certain percentage, even if sales activity indicates the property has appreciated far more. When you use an AVM or free online service, you risk a lower value than reality.


  4. What makes the comparables comparable. A computer might compare your subject property to another property with similar square footage sold three months ago a quarter of a mile away. Even if that "comparable" property is in a different, less desirable school district, fronts a four-lane, 55 M.P.H. street, and is flood-prone. Or 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. A computer simply does not know all the adjustments that might need to be made to a "comparable" property's sales price.


  5. Whether a market is declining. Automated valuations use data from recent, nearby sales. If those sales were completed at the peak of a local housing market, the computer will think the trend is going up. Even if a professional appraiser knows that the overall neighborhood is beginning to experience a downturn. As a lender, don't get stuck with a property that's been overvalued by a computer.


  6. Whether there is a conflict of interest. Free online home values are often farmed out to real estate agents in your area, who use the service to get your listing when you decide to sell. The best way to do that is to impress you with their confidence that they can get a higher price for your property. If they tell you your property is "worth" the high end of what they believe they can sell it for, the theory goes, you're more likely to sign a listing agreement. With most things, it's best to "under promise and over deliver" — but the opposite is true when you use a free online home value service.


  7. 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 and prepared 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 an automated valuation, you're cheating yourself out of an appraiser's education, experience and expertise.


Got a Question?

Do you have a question? We can help. Simply fill out the form below and we'll contact you with the answer, with no obligation to you. We guarantee your privacy.

Your Information
Your Question
Twitter Withdraws from EU Disinformation Code, Which Could Set it on a Collision Course with Regulators
5/28/2023 11:18 PM
Elon Musk's free speech stance could become a key point of contention.Read More
Snapchat Tests New ‘Dreams’ Element as Social Apps Continue to Develop Generative AI Elements
5/28/2023 10:33 PM
Generative AI is a significant leap, but we're still a way off from realizing its potential. Read More
Twitter Provides Additional API Access Tier to Address Pricing Concerns
5/26/2023 8:30 PM
Twitter's API access price hikes have put many projects on-hold.Read More
Google Expands its Digital Marketing Coaching Program for SMBs
5/26/2023 7:47 PM
The program aims to help diverse businesses maximize their online marketing efforts.Read More
Google Expands the Test Pool for its New Generative AI Elements in Search
5/25/2023 7:40 PM
Google's looking to integrate its generative AI elements into traditional Search. Read More
Twitter Adds Picture-in-Picture Video Playback, Tests New Video Download Options
5/25/2023 7:09 PM
Video is set to become a much bigger focus in the next phase of Twitter 2.0.Read More
Twitter Adds Stock Movement Insights to More Cashtags, Powered by eToro
5/25/2023 6:34 PM
The update will provide more information for market watchers in the app.Read More
Snapchat Reaches 200 Million Users in India
5/25/2023 4:26 PM
India is now Snapchat's biggest user market.Read More
Snapchat Launches Enhanced AR Try-On Tools as it Continues to Build its AR Capabilities
5/25/2023 3:54 PM
Snapchat continues to build out its AR capacity.Read More
Pinterest Launches New System to Ensure Greater Representation Within Discovery Elements
5/25/2023 3:30 PM
Pinterest's new system will help to maximize inclusion within its search results.Read More