Can a computer really know what your home is worth?

Some Lenders and property owners are relying on Automated Valuation Models (AVMs) to determine property values. And some homeowners are using "free online home values" to determine the value of their property. These computers are often located in cities far away and they rely on data gathered from a hodge podge of sources. Lenders and brokers using Automated Valuation Models, and homeowner's utilizing free online home value estimates, should be aware of what those results don't tell them. 

Is the house really there? A computer can't physically drive by a house to see if it's actually located where it's supposed to be, has four walls and a roof, and really is a four bedroom split-level and not a one bedroom shack.

Are there unique features of a property that might add to, or detract from, market value? A computer returns an estimated value of $500,000, for example. Did it account for the sewage treatment plant next door? The railroad tracks nearby with trains that blow their whistles every night? Frontage on a main thoroughfare with increased traffic influence? 

When was the last time the property was assessed? Many AVMs and free online services rely on public assessment records. In many states, for example, assessments may only be required every three years, which means the value may be nearly three years old in that case. Some states mandate that an assessed value not increase beyond a certain percentage, even if sales activity indicates the property has greatly appreciated. When you use an AVM or free online service, you might risk a lower value than reality.

What makes Comparables truly "comparable?" A computer might compare your subject property to another property with similar square footage sold three months ago a quarter of a mile away. Even if that "comparable" property fronts a four-lane, 55 MPH street, and is flood-prone. Or even if the property was sold under duress, such as in a divorce situation, or not at arm's length, such as to a family member. A computer simply does not know all the adjustments that might need to be made to a "comparable" property's sales price, often times resulting in an erroneous final value conclusion.

What are current market conditions? Automated valuations use data from recent, nearby sales. If those sales were completed at the peak of a local housing market, the computer will think the trend is going up, even if a professional Appraiser knows that the overall neighborhood is beginning to experience a downturn. As a Lender, don't get stuck with a property that's been overvalued by a computer.

Is there a conflict of interest? Free online home values are often farmed out to real estate agents who might utilize the service to get listings. The online home value service might propose a higher price for your property and thus you might be more likely to list your property. Free online home value services often over promise and under deliver. 

What qualifications, designations, experience and education does the preparer have? When you work with an Appraiser, you can be confident we're highly qualified, ethical and prepared to complete your assignment professionally and with good judgment. Most of the time, you don't know the qualifications of whoever is behind those free online values. If you're relying on an automated valuation, you're cheating yourself out of the benefits of an Appraiser's education, experience and expertise.

If you're buying or selling, insist on a real appraisal from Cynthia Dwyer Appraisal Service for a true valuation. As a professional Appraiser with years of experience, geographical competency in Sonoma and Napa counties, we know your neighborhood and your housing market. No computer can compare.