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Your home is not only your shelter and a place to create memories, but a large part of your financial nest egg and a vehicle for creating wealth. Knowing what your home is worth is important. You may need to update your insurance, do some estate/tax/financial planning or prepare for a re-finance, line of credit or a remodel. Or, perhaps you are considering a move down the road and need to know what you will net for planning purposes. Relying on accurate home valuations is critical for all these endeavors.
To estimate your home’s value, you can easily access a public website that will produce a value. This is called an AVM (Automated Valuation Model). There are a handful of AVMs such as Zillow, Redfin, and RealEstimate. These sites are free for the consumer and are based on a AI-generated algorithm that is typically a recipe of tax assessment data, CPI figures, market trend data, computer-picked comparable properties, and user-submitted data. They do not take into consideration important value points such as the condition of your home, improvements you’ve made, or nuances of the neighborhood; factors that only an actual person can evaluate.
It is important to note that on all three of these free sites, the algorithm and AVM tool are funded by the advertisers on the site, which are real estate brokers and lenders who want your business. The AVM is the carrot to get you in front of these high-paying advertisers who hope you click to connect so they can convert you into their real estate client. This is unlike the relationship-based business that I foster. AVMs are an OK starting point, but should not be considered the final word.
Here are the current AVM (Automated Valuation Model) values for a subject home from four sources (3 free and 1 fee-based). As you can see, the values vary. If you have a need to know the value of your home, don’t rely on an algorithm. According to Zillow, their accuracy varies by 7.49%; that is a huge swing! For example, that is $75,000, either high or low, for a $1M home. Depending on what you are planning for, that inaccuracy can severely cost you.
The AVMs above vary by 58%. If you apply the average Zillow accuracy percentage, the Zestimate® above could be off by $143,000 or more. It is important in this new world of AI that we do not underestimate the power of the human algorithm. An experienced Realtor with local expertise is the key ingredient for establishing a home’s true value.
Just as the AVMs vary, Realtors vary substantially as well. Seek out a full time professional (like me!) when it comes to receiving guidance on your largest asset and be careful about Realtors who engage part-time as a side hustle or have little or no experience. One mistake could cost you substantially!
Please reach out if you are interested in having me tour your home and complete a reliable Comparative Market Analysis (CMA) so you can plan for your future with confidence.
