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Automated Valuation Models (AVMs) have become increasingly popular in recent years as a quick and convenient way to estimate the value of real estate. ClearAVM is marketed as one of the more accurate AVMs available, but in reality, it may not be as reliable as advertised.

As a licensed professional appraiser, I have seen firsthand the limitations of ClearAVM and other AVMs. In fact, a colleague of mine recently had a ClearAVM done out of curiosity on their own property, and the results were shocking.

ClearAVM used comparable sales that were nothing like the subject property. The main characteristic of comparison that ClearAVM appears to have used was the presence of an in-ground pool. However, none of the comparable sales were on the subject's lake or any lake for that matter. It doesn't even take a trained professional to know that lake frontage is usually the most important contributor to value for a property on a lake. Furthermore, ClearAVM indicated that the subject property was a modular home, which is not accurate as it is a normal stick-built home. These are not minor issues that don't affect value. Imagine if you were relying on ClearAVM to decide on listing your lake home and they suggested a list price significantly lower than market value?   These issues highlight a significant limitation of AVMs - they often lack the context and nuance that only a licensed appraiser can provide.

The limitations of ClearAVM go beyond the lack of context and nuance. ClearAVM and other AVMs are entirely computer-based and do not involve a human appraiser physically visiting the property or analyzing the local market trends. This can lead to inaccuracies in the estimate, especially in areas with complex or unique properties or in neighborhoods with rapidly changing market conditions.

Furthermore, AVMs like ClearAVM rely on publicly available data such as recent sales and property characteristics to make their estimates. However, they do not take into account factors that may affect a property's value but are not publicly available, such as the condition of the property, any recent renovations or upgrades, or the neighborhood.

Finally, while ClearAVM and other AVMs may be convenient tools for estimating a property's value, they should not be relied upon as a substitute for a professional appraisal completed by a licensed appraiser. The limitations and inaccuracies of AVMs like ClearAVM can lead to costly mistakes and legal complications. Again, imagine relying on ClearAVM to come up with a list price for your home on a lake, and it used comparable sales that seriously undervalued your home. The loss of potential proceeds could add up to hundreds of thousands of dollars. It's particularly concerning that AVMs are increasingly being used by banks and lenders to make lending decisions, as this could have far-reaching consequences for both consumers and the economy. Without accurate and reliable valuations, there's a risk of undervaluation or overinflated property values, higher rates of default and foreclosure, and instability in the real estate market. If you want an accurate valuation of your property, it's best to hire a licensed appraiser who can provide a thorough analysis of the property, local market trends, and other relevant factors.

April 14th, 2023 9:26 AM

When it comes to selling a home, setting the right price is crucial to attract potential buyers and ensure a successful sale. However, determining the right price for a property can be a complex and challenging task. That's where a professional appraiser comes in. Hiring an appraiser to decide the listing price for a home sale can be a wise decision for several reasons.

Here are some of the reasons why hiring an appraiser is important when deciding on a listing price for your home:

1. Accurate valuation: One of the primary reasons for hiring an appraiser is to obtain an accurate valuation of your property. An appraiser is trained to analyze various factors that can affect the value of a property, such as location, condition, size, and market trends. By considering all these factors, an appraiser can provide you with a realistic and objective estimate of your home's worth.

2. Unbiased opinion: Appraisers are independent professionals who do not have any stake in the sale of the property. Unlike real estate agents, who may be motivated to suggest a higher price to secure a sale and earn a commission, appraisers are neutral and objective. Their only goal is to provide an unbiased opinion on the value of the property based on factual data and analysis.

3. Negotiation advantage: Having an accurate appraisal report from a professional appraiser can give you an advantage during negotiations with potential buyers. If a buyer makes an offer that is significantly lower than the appraised value, you can use the appraisal report to support your asking price and justify why it's a fair price for the property. 

4. Peace of mind: Selling a home can be a stressful and emotional process. Having a professional appraiser provide an accurate valuation of your property can give you peace of mind that you're not leaving money on the table or overpricing your property, which can lead to a prolonged listing and fewer potential buyers.

Hiring an appraiser to decide the listing price for your home sale is an essential step in the selling process. It can provide you with an accurate, unbiased, and defensible valuation of your property, giving you an advantage in negotiations and legal protection, and ultimately ensuring a successful sale.

Posted by Nick Hughes on April 14th, 2023 9:26 AMLeave a Comment

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