Zestimates and Automated Valuation Models (AVMs) have been around for years. If you're unfamiliar, AVMs are tools used by banks and mortgage lenders to estimate property values. They analyze data from:
Public records
Recent sales in your area
Tax assessments
User-submitted information from agents and homeowners
A Zestimate is Zillow's version of an AVM, with a nationwide median error rate of 2.4% for on-market homes and 7.49% for off-market homes*. Other real estate sites, like Realtor.com with its RealEstimate, also provide similar value estimates using multiple data sources.
AVMs and Zestimates offer a quick and easy way to get a ballpark figure for a home's worth. While AVMs are often more accurate due to sophisticated data and professional fine-tuning, they shouldn't be the sole determinants of a property's value. They lack the nuanced insights of a local real estate expert or a detailed professional appraisal.
One issue with AVMs, especially recently, is the reliability of comparable homes (comps) used in the valuation. Due to low inventory, some AVMs may use less-than-ideal comps simply because there isn't enough data available. The AVMs are also not taking into account important market factors like the need to focus on the list price of homes rather than the sales price as we mentioned in last month’s email. (If you missed that, you can check it out here!)
Even in a more balanced market, automated values can sometimes miss critical factors like recent renovations, changes in the neighborhood, or unique property features that significantly impact a home's value. These nuances are best captured by a professional who can conduct a thorough in-person evaluation.
So, should you trust Zestimates and AVMs?
Zestimates and AVMs are great for getting an initial idea of a home's value. However, if you're serious about buying, selling, or refinancing, consulting with a real estate professional is essential. They can provide a more accurate and personalized assessment.
Think there's something off about your home's Zestimate? Reach out to me! I'd be happy to take a look for you.
Do you think an AVM could properly price this dome? 🧐
I mean...the AVM tried but, in reality, we invested hours in the process! We evaluated comps, consulted with several appraisers, had group conversations with our Team Manager and Team Leader...We do what it takes!
