Appraisals vs. AVM’s

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We’ve been asked pointedly, why are the results of Appraisals different than AVM‘s?

Unfortunately, it is not a straightforward answer, but we’ll make a valiant effort to be brief:

To us, first and foremeost is the current market conditions. The fact is that for the past few years the real estate market has declined in most market segments…. some more than others, many for differing reasons, some for location, some for condition. Therefore, the most recent local market conditions is a major consideration when deciding to use an appraisal. The AVM can’t tell you things have affected the market and to what degree it has. Remember…Timing is everything!!

The subject property traits should be determined. Is the property truly there? What is the location situation…. in a sub-division, on a main street, near an airport, any environmental conditions, power lines, et al? What are the external conditions…. property, neighborhood, lot, roof, siding, et al? Interior condition… walls, floors, HVAC, plumbing, et al? The AVM doesn’t have this capability.

Another important consideration is the comparables. AVM’s use computer generated data. As a base for information, that’s fine. However if a comparable property generated is in a less desirable area, fronts a highway or in a flood-plain, these differences are not considered; nor does it know if the comparable was sold as an arm’s length transaction, or a divorce situation, etc. A computer simply doesn’t know all the adjustments that need to be considered in the comparable’s sales price.

There are other arguments about qualifications, conflicts of interest, et al. We believe that they all have valid points, however the fact remains that they all seem to have a place in the process. If your need is to have a value determination that is not based upon a detailed analysis for the specific case you have, then an AVM may be sufficient. However, if you need a factual based, supported opinion of value, then your choice must be an Appraisal. Remember….. You get what you pay for!!

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