Tag: tech tools

Are AVMs (automated valuation models) replacing the CMA?

Anne Ewasko Leave a comment

With the advancement of tech-based real estate services such as Zillow, Realtor.com, Redfin and others, customers can easily research and estimate the value of their homes without involving a Realtor. The big question is, how accurate are they?

Property valuations are the most integral part of a real estate agent’s business. You may find, or already use, easy and quick ways to determine property values. One such method is using an automated valuation model, or AVM. With so many options available, you will want to know how an AVM can benefit you and who the top providers are.

What exactly is a real estate AVM?

A real estate automated valuation model is a machine learning-based system that examines various data points to determine the worth of a particular property.

The information examined often includes details of the property, comparable sales data, the property’s age, market trends and more. There are many available real estate AVMs on the market. Zillow’s “Zestimate” is the most popular.

The Zestimate

Zestimate is a key feature offered by Zillow and one of the first AVMs made available to the general public. When introduced, it caused some controversy, particularly among real estate agents. However, the Zestimate is so prevalent in clients’ minds that agents frequently intentionally bring it up during their listing presentations, detailing why it is either high or low or, perhaps, exactly right.

Zestimate pros and cons

The main benefit of Zestimate is that it gives users a basic idea of the value of their homes. On the other hand, Zillow’s estimates frequently rely on data submitted by users; as such, they can only be as reliable as the information given to them. Users’ errors or omissions can jeopardize the accuracy of the data.

Other common real estate AVMs: Realtor.com’s AVM; Trulia’s AVM; CoreLogic RealAVM; House Canary; Realtor Property Resource (RPR); Homesnap; Freddie Mac Home Value Explorer; ATTOM Data Solutions; Collateral Analytics (Black Knight); Veros; Quantarium (Xome); Clear Capital.

AVMs are always estimates — they will never compare to a CMA

AVMs should not be used to give a home’s final value. They only provide estimates and can be misleading. Any AVM should be described as an estimate. Most of the commercial sites use them as a catalyst, not a stand-in, to encourage website visitors to contact one of their subscribed agents and to sell the leads. This is one of the many ways they make their money. AVM estimates are not intended to take the place of a more thorough property evaluation that involves an in-home inspection and a detailed comparative market analysis (CMA) from an experienced agent.

Actually, AVMs are a starting point when determining values that you, as a Realtor, will be able to use to establish yourself as an expert in your area for pricing and win more business.

I recommend that you use two to three of them when doing listing presentations so that you can show the homeowner how these AVMs can vary in their valuations and then take another step to show a more detailed CMA (Comparative Market Analysis) that factors in details like home improvements, functional obsolescence, desirable/undesirable lot, etc. This is especially important in areas that are not homogenized like large cities where AVMs often use a condo as a comparison for a single-family home which can really skew the numbers.

Three good AVMs to consider:

1. Realtor Property Resource (RPR)

RPR is a free online tool that helps Realtors estimate a home’s value based on the property’s features, renovations and the housing market. This tool can also assist consumers in deciding whether it is cost-effective to buy a house and later remodel it.

Realtors can use the report obtained to educate prospective buyers and sellers regarding what the local market offers, which helps set reasonable goals. So far, there are no significant pitfalls, but it needs to be updated often for easy navigation.

2. CoreLogic RealAVM

RealAVM is one of CoreLogic’s efficient and easy-to-use products. It provides the first glimpse at recent house price movements, providing an initial baseline for appropriately valuing collateral (and mortgage risk).

The RealAVM is just one component of the property information sheet for real estate agents using CoreLogic’s Realist software; it is not a consumer-facing AVM but a great tool to use for determining value.

3. ATTOM Data Solutions

ATTOM is a trustworthy source for reliable, nationwide real estate data. It offers analytics-ready data for real-world applications with flexible delivery solutions like ATTOM Cloud and one of the market’s top real estate data APIs.

Your individual needs, opportunities and goals will be met by ATTOM’s adaptable property data delivery solutions. Through a range of delivery methods, ATTOM Data can quickly establish data management processes and address your real estate data needs.

Bottom line

Major AVM providers highlight their precision, thoroughness and time-saving abilities. But AVMs work with averages. They are, therefore, instrumental in areas with fairly uniform property stock. On the other hand, they might not be as precise or helpful in areas with a wider variety of homes.

While their use is expanding, AVMs have not replaced human valuation estimates and will never compete with a Realtor-made CMA. Take advantage of these useful information resources, but then show your value as an expert real estate home evaluator with detailed and accurate pricing derived from your CMA. You will impress your clients and boost their confidence in you. This will win you listings and attract more buyers as you become their trusted Realtor. More listings and more buyers means a better bottom line!

Anne Ewasko is a veteran Realtor in the Chicago area and a longtime techie. Visit her at anne.luxhomechicago.com.

Use this easy tool to become your local market expert

Anne Ewasko Leave a comment

It’s been a roller coaster of a year, and there are a lot of misconceptions about what is really going on with the real estate market. It seems that everyone has a different opinion, but I feel that is always the case no matter how crazy things have been recently. So, how do we get to “the truth” of what’s really going on in our local markets? As real estate brokers, we need to understand our hyperlocal market, and there are ways that you can slice and dice the data so that you can provide the real picture for your clients in a very clear and concise way.

People see national headlines and hear all sorts of things that are happening across the country, and sometimes they get panicked by it. However, what may be happening in one part of the country does not necessarily apply to what is happening at home. This is where you can come in to dispel the misconceptions that are out there. You cannot just throw a large blanket across a market and say it’s the same all over; it doesn’t work that way. As a matter of fact, in my own Chicago market, it is vastly different from neighborhood to neighborhood, block to block or even… building to building!

So, how do you break it down to your local level? First of all, I like to start at the top on a macro level and picture it like a large funnel that needs to get filtered down to the hyperlocal level. Those of us who have attended a real estate conference are probably familiar with Steve Harney, the founder of Keeping Current Matters. KCM has been around a long time and has really perfected the art of deciphering market data into very clean and concise templates. I trust their data, because they pull it from reliable resources like Zelman, MBA, NAR, Fannnie Mae, Freddie Mac — all of which use different formulas that can vary greatly, but KCM consolidates the data and shows the averages from those resources, providing the most accurate picture.

KCM releases the updated data on the 10th of every month. They put them on beautiful templates, which they call “infographics,” that have amazing designs that get the message across in an instant. Subscribers to KCM get access to this information that you can personalize and share, which is great for social media and monthly mailers.

But that’s just the top of the funnel. Now you need to do a deeper dive for your local market and then show how that compares to the macro level provided by KCM. It’s really easy to do, and one of the tricks I use is to select one of the infographics from KCM that I think my clients will gravitate toward or is a hot topic in the media. From there, I run my own stats from the MLS to do a comparison. Right now, the big buzz all over the country is low inventory. Okay, so how low is it in my market? Easy: Pull up the MLS data for however tight you want to go geographically, or, perhaps, you want to focus on a specific type of property: condos, town homes, single-families, etc. Then see where the inventory and month’s supply is at, and voila! There you have it. Now you can compare your local data to the macro stats provided by KCM to show your clients the truth of what is really going on locally. Clients love this detailed information; this is what they crave and what they need. As their real estate professional, they rely on you for it.

By disciplining yourself to run a local stat just once a month and comparing it to one of the macro stats provided by KCM, your clients will think you are a genius, and on top of what is going on — which you will be. They will quickly depend on you for truthful insight on what is really happening at home, and when it comes time to list or buy, you will be their trusted go-to person that they can count on. “Keeping current” really does matter!

For more on real estate tech, watch AgentEDU’s course on technology for real estate.

Anne Ewasko is a veteran Realtor in the Chicago area and a longtime techie. Visit her at anne.luxhomechicago.com.