REAL ESTATE REEDER July 2014
(253) 234-7626
Why Home Sellers Need a Real Estate Agent to Price Their Home
Photo: © Goodluz - Shutterstock

A quick internet search will reveal dozens of Automated Valuation Modeling (AVM) sites that promise to tell you how much your home is worth. These AVMs use statistical modeling techniques that "value" your home by comparing it with the price of similar-sized homes that have recently sold in your area. Using proprietary software, AVMs crunch publicly-available numbers from the multiple listings service and combine this with regional pricing trends to set a sale price for your home. Enter an address, and up pops a value. So why does anyone need a real estate agent?

Because AVMs Get It Wrong
Most AVMs admit that valuations may be out by as much as five percent. In fact, a recent study by Standard and Poor found inaccuracies of up to 20 percent, meaning that anyone relying on an AVM valuation could be seriously under- or overpricing their home. Old data accounts for some of the error. Because AVMs rely on public sales data, there can be a two or three month time lag between a sale closing and the data hitting the AVM. In a fast moving market, the time delay dangerously distorts the price.

What's more, AVMs do not take into account the condition of your property, nor the condition of the comparable properties that make up its data stock. The fact is, no two homes are alike. Statistical modeling does not account for your home's inlaid marble floors or state-of-the-art kitchen, just as it doesn't account for half the homes on a block standing empty and in foreclosure. Software cannot see these things, so assumes that every home is in average condition. This does not reflect reality, so the valuation comes out wrong.

Missing Links
A great deal of information determines the valuation range for your home. Market data is one piece of information. Others are property-specific, such as whether your basement is damp or you've had new hardwood floors installed. Others still relate to the neighborhood and its characteristics, such as transport links, local shopping and recreation facilities and zoning restrictions. AVMs simply don't have access to this information.

The Alternative - A Comparative Market Analysis
Real estate agents are trained to prepare a comparative market analysis, or CMA, for every home listed for sale. This involves a physical inspection of the subject property and local knowledge, which combine to give a valuation range. Note the word "range:" CMAs do not, as some people expect, ascribe a single sales price to a property. Rather, they specify the range of prices that the property could achieve on sale, depending on how quickly the seller wants to achieve that sale and other factors.

Preparing a CMA is an art, not a science. There's no one-size-fits all. Quality CMAs require thorough knowledge of the dynamics of property sales in a specific neighborhood. The agent makes judgments based on his / her understanding of the local market and the dozens of peculiarities that affect price, such as lot size, lot orientation, tax assessed value, features of the lot, including its terrain, access and privacy, improvements and additions, condition, quality and age. For example, your agent may know that an overextended home, the appearance of which is out of step with the neighborhood, will likely sell at a discount: an AVM will count only its square footage, and come up with a valuation that's too high.

Every home is unique and must be valued accordingly. Get it wrong, and you risk deterring buyers, or not getting the money you deserve on a sale.

Team Marti  -  (253) 234-7626 REAL ESTATE REEDER  -  July 2014 

Team Marti, Team Marti, 13036 SE Kent Kangley Rd PMB 459 PMB 459, Kent WA 98030
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The material in this publication is provided for your informational purpose only and is not intended to substitute professional advice.
If your property is currently listed with a Real Estate Broker, this publication is not intended as a solicitation.
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