Understanding Home Value - Agent or Algorithm?
More often than not, clients will ask me about the estimated value of their home as reported on Zillow, Redfin, or the like. Sometimes, it’s higher than they expect, leading to conversations where I help ground their expectations in the reality of the market. Sometimes, it’s lower than they expect, which can lead to unnecessary anxiety. But, in either case, I always counsel my clients to take these valuations with a hefty grain of salt. Read on to find out why…
What is an AVM?
Automated Valuation Models (AVMs) like Zillow, Realtor.com, or Redfin provide estimates of home value. These estimates are easily accessible by homeowners and prospective buyers with the simple click of a button.
So, given the ease of using AVMs, how is an analysis by a Realtor® a better way to assess home value?
How AVMs Assess Home Value
AVMs rely on widely available public information sources. These data models do not take into consideration factors that are not accessible through public sources. Often, these are factors that can have a significant impact on the value of your home. And this is especially true in our market here in San Francisco.
An informed and experienced agent is looking at the same public information sources as AVMs. In addition, a good agent is also personally evaluating the home in ways AVMs cannot.
How Realtors and AVMs Evaluate Your Home Value
- Public tax records
- Permit history
- Sales history
- Sales prices of other properties nearby
- General market trends
- Location/neighborhood
- Square footage and number of bedrooms/bathrooms
How Realtors Also Evaluate Your Home Value
- The overall condition of your home
- Quality of your home’s finishes, fixtures, and appliances
- Landscaping and condition/size of outdoor living spaces
- Upgrades and renovations to your home that have been completed with and without permits
- Bonus spaces that are “unwarranted” (unpermitted)
- Other factors like privacy, proximity to the street and amenities, natural light, views, how busy the street is, etc.
- And, sometimes it’s just an intangible feeling you get from being in the house, as subjective as that sounds!
Overall, relying solely on AVMs leaves plenty out of the picture, and too often paints an incomplete picture of the home’s value in the market.
Real Buyers Are Looking at More Than Data
It’s important to note that AVMs are continuously improving their algorithms and are more accurate than in the past. However, these days and in our market, buyers are placing a premium on features that AVMs are simply not equipped to assess.
For example, beyond a home’s basic stats, many buyers are looking for move-in ready homes. Consequently, they are evaluating homes based on features like usable outdoor living space, up-to-date fixtures and appliances, ample storage, and more. These are features that an agent can evaluate in person and with a careful review of disclosures.
While it’s true that AVMs provide a jumping-off point in understanding your home’s value, they are subject to many limitations. However, a thorough analysis by an experienced Realtor® will help you understand all of the factors influencing home value. As a result, this in-depth analysis can help you make decisions with confidence.
Informed, Strategic Pricing is the Key to Your Success
Ultimately, the market is the truest measure of your home’s value. As my clients have heard before, I always say the market will speak. For this reason, pricing your home right from the start is critical to a successful home sale. An informed pricing strategy, along with proper preparations, can mean a difference in tens of thousands of dollars or more to your return.
As an experienced agent, I have the expertise to help price and position your home to stand out in the market and yield the best possible results. With a clear understanding of home value, and my guidance, you can set a list price that attracts the most potential buyers to help you achieve your goals.
