1. They Have Inaccurate or Missing Data
AVMs compile data from multiple sources like public records, recent sales data, and property characteristics to generate estimates. These data sources are often incomplete or inaccurate, which can significantly distort the valuation. Garbage in, garbage out.
2. They Don’t Know Your Home Is Unique
AVMs perform best in planned communities where homes are fairly uniform, making it easier to calculate accurate comps. But in cities like Los Angeles where every property is unique, algorithms get wonky. They are blind to distinctions that can really sway property value like exceptional views, proximity to freeways, or even which side of the street the house is located on.
3. They Don’t Recognize Upgrades or Issues
Have you remodeled your kitchen? Added a deck or finished a bonus space? AVMs don’t have a clue. They assume your home has the same value as those recently sold, without factoring in your upgrades. Same goes for issues. They can't see hidden problems in a home, such as a leaking roof, a sagging foundation, or other things that might be apparent in person.
4. They Ignore Local Market Dynamics
Real estate markets can be unpredictable, and AVMs can’t always keep up with the rapid changes. They often struggle to incorporate local market dynamics like school district quality, nearby amenities, and transportation infrastructure, which can significantly influence property values.
KEY TAKEAWAY
Automated Valuation Models (AVMs) can give you a rough idea of your home's value, but here's the catch: they lack human insight and are incapable of capturing the full complexity of a property's unique features and local market dynamics. For a more precise valuation of your home, talk to a local real estate professional.
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