Are AVMs giving your clients unrealistic expectations?

How many times have you met with a client that has an unrealistic expectation of a house’s worth thanks to automated valuation models, also known as AVMs, that they found on a website?

Seems to be a common problem lately, said Karen France, the senior VP for MLS Services for Realtors Property Resource®. “Customers are quoting AVMs that are not a true indication of the market value of properties. The problem with the consumer-facing websites that give these numbers is that they are usually based on incomplete and inaccurate information,” she said.

She said the problem is that these AVMs often only have the listing prices to use for data, and not the sold prices. “So, these estimated values are based on public record information, which are often incomplete and inaccurate.”

RPR®, which is a member resource for all NAR members, offers their own valuation model,  known as Realtors Valuation Model®, or RVM. The RVM factors in MLS listings, sales and off-market data to produce more accurate estimates, France said.

“The beauty of it is that it takes public records and mixes in MLS data. The MLS data that public-facing sites use for their AVMs does not include sold information. Real estate agents know that sold is gold,” she said. “It’s valuable information to the Realtors® in the field.”

France said that Realtors® should be prepared for what information their homeowners or homebuyers have already found themselves online. “Do your homework ahead of time,” she said. “Don’t walk into a listing appointment or go show properties without knowing what the consumer-facing websites are saying. Do your research.”

Having RVMs readily available to compare helps as well, she said. Realtors® should assure their clients they have the experience and the knowledge about the market to accurately estimate a home’s true value is.

“AVMs spread unrealistic expectations. If the AVM produces a value that is really high, it sets false expectations for a seller. If it’s low for a buyer, they think they can use that for a negotiation rate,” she said. “Smart agents do their homework.”