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PAA Collaborative Sharing of Real Estate Appraisal Information

The Problem with AVM's
April 16th, 2007 9:17 AM


The Problem with AVM's

AVMs (Automated Valuation Models) are now gaining widespread use in determining Real Estate property values, through the use of non-standardized computer programs.

In a perfect static world, computers could easily estimate property values if the prices simply remained the same, or just changed at minimal or specific predictable rates. In reality, the Real Estate market is extremely dynamic and ever changing. This is particularly the case in Santa Barbara County, where typical home prices vary significantly from the nationwide median norm.

The other problem with computers predicting Real Estate values is the old adage "garbage in, garbage out." Computers need reliable data to make accurate predictions, but this data is simply not available in many areas, especially here on the Central Coast. The accuracy and recency of data is also an important factor, and AVMs inherently lag in their pricing data and results.

Computers aren’t appraisers, so they can’t see your new addition, special flooring, tile countertops, landscaping, etc, and they don’t consider these very important amenities when calculating the value of your home. Whether your house is the great Taj Mahal Palace in India, or a burned down ruble, the computer algorithms only appraise your house as a median data average.

AVM’s are historically inaccurate. It is no surprise that the City of New Orleans and the Federal Government (FEMA) recently issued a directive to stop using AVMs, since they were notorious for being grossly inaccurate. In fact, the typical errors rates were as high as 50%, and both in undervaluing and overvaluing properties.

AVM’s are clearly flawed, but despite this fact they are becoming the new rage in the lending industry to get appraisals faster and cheaper. The problem is when the estimates are grossly undervalued (which is often the case), then these inaccurate computer valuations cause the loan deal to fall through. Many times the borrower/client is the one that ultimately loses in the end since the qualifying value could not be met with the AVM, so they have basically paid for a worthless computer report. Just as serious, an overvalued AVM property appraisal gives the owner false information that could later cost them thousand of dollars.

Choose a real person for your next Real Estate Appraisal, not a flawed computer program. PAA - Professional Appraisal Associates has been performing Real Estate Appraisals on the Central Coast since 1991. To us, you and your home are not just statistical data points. We physically inspect and evaluate your property, and consider all the many amenities and upgrades you have worked hard to purchase and/or install. Instead of wasting time and money paying for an AVM that is either significantly under or overvalued, give us a call and let a local expert perform a quality Real Estate Appraisal at a best value price.

For more information about Professional Appraisal Associates, visit us at our Website at: or feel free to call us at (805) 688-5033.

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Posted by Susan Kraushaar - AR009243 on April 16th, 2007 9:17 AMPost a Comment

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