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How AVMs fared in Northern Virginia Market
If a REALTOR® made that pitch to you, would you rely on their advice? Of course not, but we see folks - buyers and sellers alike - who attempt to determine the value of a home using resources that are just that "reliable."
There's not a week that goes by that someone doesn't trumpet the "value" of an individual property based on the tax assessment or on the estimate of value from any of several Internet sites that have developed automated valuation models - AVMs, for short.
So, we decided to put them to the test, using 50 properties that went to settlement in Northern Virginia in the second half of February 2010 and comparing the actual net sales price (the sales price less any seller-paid subsidy) to the predicted value from three popular AVMs as well as the taxing jurisdiction's current assessment. We bent over backwards to give the AVMs the best chance of being accurate, so we first limited our selection to resale homes only, figuring that many of the websites would not have accurate info about newly constructed homes.
We chose a variety of resale condos, attached and detached homes ranging from a low price of $138,000 to a high of $1,650,000. To be as generous as possible, we looked at the "predicted" value after the properties had gone to settlement, knowing full well that the AVMs could have had the opportunity to update their models with the actual sales price, and thus be far more accurate than they might have been had we looked at their predicted values before the properties went to settlement. As for the tax assessment, we made sure we used the newly published 2010 values. The chart at the bottom right shows the dismal results.
The first measure of accuracy was whether the site even had information about the 50 selected properties, and here they fared quite well. As one might expect, every property had an assessed value, and the three AVM sites had a predicted value for almost every property. But things went downhill pretty fast from there. The "best" of the AVMs (Zillow.com) predicted values within 5% of the actual sales price just 39% of the time. The assessed value was within 5% of the sales price just 26% of the time. And these sites were far more likely to predict a value well below the actual sales price.
There are lots of reasons why these resources are so consistently inaccurate and, if you look closely at the fine print on the AVM sites, you'll see even they don't claim to be accurate. No computer model can account for the new kitchen that was just put in, the updated landscaping, the bright purple paint in the family room, or the three cars up on blocks in the front yard of the house next door. They can't assess a seller's motivation to sell, or the lack thereof. A good REALTOR® will have a better handle on these factors and many more every time - and therefore a much better idea about what the value is every time. So we'll be blunt: these resources are useless for determining what a home is actually worth, and anyone who relies on their accuracy does so at their own peril.
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MarketWatch is a publication authored by David Howell, managing broker of McEnearney Associates, Inc. Realtors in Mclean.
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Buying or Selling Real Estate in Del Ray or Old Town Alexandria VA? Looking for short sales in Alexandria Virginia? Contact Tamara Inzunza, Associate Broker of McEnearney Associates, Inc. Realtors to list and sell your home, or purchase a new home. I specialize in Old Town Alexandria, Del Ray, Kingstowne, and Manchester Lakes condos, townhomes, and single-family homes for sale.
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