November 23, 2015 by Jeff Lowen
Yes, we live in the twenty first century and technology is as “normal” as breathing it seems, yet where does the line exist that separates the value technology brings to the table and then human interaction takes over? …Or it is the other way around? 😦
We’ve all heard of the “Zestimate,” Zillow’s AVM, or Automated Valuation Model. Banks have been using them (Their own AVM) for years to value your property on sales, refinances, or any other time they see fit to put technology to work to value a property without getting a human involved. It’s cheap, uh, free… Quick and reasonably accurate with an acceptable percentage of error.
The first question is, as a homeowner can you recognize the difference when, “Reasonably accurate with an acceptable percentage of error” is sufficient, and when it’s not? Allow me to help.
If you’re refinancing, and that “acceptable percentage of error” means that the bank’s AVM has way-over valued your property, is that a bad thing? “Oh Mr. Jones, we can lend you an additional $50,000 if you like…”
What if you jump online and hit up Zillow? Or a myriad of other sites that use AVMs to find the value of your home and get a number that no real estate agent in their right mind would agree to list your property for (As if that would happen! There are countless agents that would take a grossly over priced listing for many reasons; most of which do not help you, the homeowner).
So the second question is, what makes an AVM better or worse than someone with a few hours of training whom happens to have a real estate license? Answer: Nothing. Really… If your best friend who works for an IT company 50 hours a week, has a part time job delivering pizza and sells real estate on the side, an AVM is better. Yes, way BETTER.
There are countless average agents out there, and if you happen to find one – which your chances are pretty good that you will – using an AVM to value your property may be a lot better. With just over a million Realtors in the country, did you know that nearly one third of them did not even sell a home last year?
Me: “Hey doc… I need a hernia operation” Doc: “Sure, I can do that. I’ve only done one or two in the last few years and I’m not up on all the latest tools and techniques that would help heal you faster, make the op safer and won’t hurt as much, but I’ll do it! Let me just scrape the rust off my spoon. I mean scalpel! …Anesthetic, what’s that?”
Lol – Er… Not really!
The moral of the story is that AVMs look at numbers only. Past sales, public records, maybe beds/baths and if you’re lucky, square footage. An agent might do a CMA, or Comparitive Market Analysis, that does little more. That may be good enough for you. The bottom line is that you must be careful with any valuation and one is only as good as the information and criterion by which it’s created.
And our third and final question… Do I need something more comprehensive than an AVM from a site online or a CMA from some agent? One place you’ll need that is when you sell your home. We’ve identified over one hundred variables that if gone unchecked – as most agents and ALL AVMs do, then you may in fact be leaving thousands of dollars on the table. If that’s okay with you, then best of luck. I’m guessing it’s not okay and when you sell, you’ll want the best opportunity to maximize your net profit on the sale of your home.
Want to learn more about these additional variables? Stay tuned for my next article on the seven laws you must know as a homeowner when selling your home, Contact us today, or Click Here.
All this too confusing and thinking of just selling it yourself? Read this: “For Sale By Owner – Or Will I?”