Can Automated Valuation Model Replace a Real estate Appraiser?

November 29th, 2021 7:45 AM

Can Automated Valuation Model Replace a Real estate Appraiser?

What Is an Automated Valuation Model? 

An automated valuation model (also known as AVM) is a service for determining residential and commercial real estate property value. This service determines the worth of a property using mathematical or statistical modeling and a mix of current databases.  The vast majority of AVMs compare identical property values at the same time.

How Does AVM’s Work?

AVM technology is used by appraisers, investment experts, and lending institutions to analyze the residential property. An AVM is a residential value report that generates very quickly. It’s a report that’s heavily reliant on technology. The output of automated valuation technology is a calculated estimate of a residential
property’s probable value based on the study of public record data and computer decision logic. AVMs combine two or more methods of evaluation, the most frequent of which are the hedonic model and the repeat transaction index. Each model’s output is given a Confidence Score, which is then weighed, assessed, and delivered as a final value estimate based on a specific date.

Do We Still Need Real estate Appraisers?

AVMs are used throughout the real estate industry, but are they the best way to determine a property’s value?

An appraiser can be more accurate with the current condition of the property. As for AVM, it can not know for sure the actual condition of the property. So this one difference can be significant, especially if the property is a newly built home. It can be a real challenge to even come close to an actual value due to the lack of comparable properties. 

The Bottom Line

AVM is good to use as a baseline. However, it can never replace Appraisers.

Most mortgage lenders will require an Appraiser to do a personalized property appraisal in person due to worries about accuracy.