Automated Valuation Models are computer programs which are designed to estimate the market value (or consensus selling price) of residential real estate. There are many versions.
They generate results very quickly, which is a real asset in the internet age, and are used for an entire spectrum of reasons, from simple curiosity to benchmarking loans.
They also have several problems. Because they are universal, they tend to use public records for their data source and public records can be incomplete and inaccurate, though they are improving. The major producers and users of these models are constantly striving for improvement and continuously run studies that attempt to measure the accuracy of these models.
The bottom line, at least so far, is that even the best of these models, by their own standards of accuracy, are accurate only about 50% of the time. This compares with an accuracy level of 76% for real estate agents, as reported in the same studies.
The availability and speed of these AVMs makes them very popular though and many of them have a significant reach and significant influence.
This also reflects on real estate agents who are often challenged by clients who have and AVM estimate for their home and want an explanation for the difference. Agents armed with a CMA know full well what the differences are but are often at a loss to explain them because the CMA is seen as “just another valuation” like the AVM, with the disadvantage that it came from an agent and the AVM estimate came from a disinterested third party.
RealPrice solves that problem by providing the agent with a computation system that the agent controls. The data comes from MLS databases, which are the highest quality databases available. The calculations are all automated, so results are delivered quickly and all of the default values are available to be modified by the agent, so the agent has total control of the output.
Because of the combination of the agents’ knowledge and experience and the automated time savings available in RealPrice, we believe that agents can achieve an even higher degree of accuracy than that reported in the above studies. So far the agents using the product seem to think so.
That’s important because AVMs, at least those in the public domain, are used primarily to attract people to websites. RealPrice is designed by agents, specifically for agents, to be used to assist agents in providing serious pricing advice to their clients.
The attached chart shows why RealPrice is different from AVMs in it’s reliance on the professional judgment of real estate agents to inform the model.