|
7 THINGS AN AUTOMATED OR NON-APPRAISER
VALUATION WON'T TELL YOU
Lenders and brokers using Automated Valuation Models (AVMs) and homeowners using "free online home values" to determine the value of a property need to know what those results aren't telling them.
1. Whether the house is really there.
A computer can't so much as drive by a house to see if it's actually located
where it's supposed to be, has four walls and a roof, and really is a four
bedroom split level and not a one bedroom shack.
2. Whether unique features of a property might add to or detract from
market value.
So a computer returns an estimated value of $150,000. Did it account for
the sewage treatment station next door? The railroad tracks nearby with
trains that blow their whistles every night? The school district? The
desirability of its tree-lined street versus the next street over?
3. How long ago the property was assessed.
Many AVMs and free online services rely on public assessment records. In
many states, for example, assessments may only be required every three
years — the value may be nearly three years old in that case. Some states
mandate that an assessed value not increase beyond a certain percentage,
even if sales activity indicates the property has appreciated far more.
When you use an AVM or free online service, you risk a lower value than
reality.
4. What makes the comparables comparable.
A computer might compare your subject property to another property with
similar square footage sold three months ago a quarter of a mile away.
Even if that "comparable" property is in a different, less desirable school
district, fronts a four-lane, 55 M.P.H. street, and is flood-prone. Or even if
the property was sold under duress, such as in a divorce situation, or not at
arm's length, such as to a family member. A computer simply does not
know all the adjustments that might need to be made to a "comparable"
property's sales price.
5. Whether the market is declining.
Automated valuations use data from recent, nearby sales. If those sales
were completed at the peak of a local housing market, the computer will
think the trend is going up. Even if a professional appraiser knows that the
overall neighborhood is beginning to experience a downturn. As a lender,
don't get stuck with a property that's been overvalued by a computer.
6. Whether there is a conflict of interest.
Free online home values are often farmed out to real estate agents in your
area, who use the service to get your listing when you decide to sell. The
best way to do that is to impress you with their confidence that they can
get a higher price for your property. If they tell you your property is
"worth" the high end of what they believe they can sell it for, the theory
goes, you're more likely to sign a listing agreement. With most things, it's
best to "under promise and over deliver" — but the opposite is true when
you use a free online home value service.
7. What qualifications, designations, experience and education the
preparer of the value has.
When you work with an appraiser, you can be confident we're highly
qualified, ethical and prepared to complete your assignment
professionally and with good judgment. Most of the time, you don't
know the qualifications of whoever is behind those free online values,
and they couldn't compare to an appraiser's if you did. And if you're
relying on an automated valuation, you're cheating yourself out of an
appraiser's education, experience and expertise.
|