One of, if not the most, talked about subjects in real estate right now is AVMs (automated valuation models). More specifically, how Zillow’s AVM and their reliance on it within their “Zillow Offers” iBuyer program caused them to fold the service entirely.
If you’re unfamiliar with this trending story, check out this article, this one, or this one to get up to speed. While many industry professionals have shown support for seeing the “Zestimate”, it has also been criticized as to its accuracy in determining home valuations. This story has brought AVMs in general into the light as a hot topic as well.
And that got us thinking about our version: the RVM® (Realtors Valuation Model®)…
AVM technology sprang up just over twenty years ago, where its initial use occurred most often in mortgage lending and real estate investing. It uses a mix of algorithms, artificial intelligence and aggregated, public data to create digital comps and home value estimates.
The tech graduated to pop culture status in 2006, when Zillow launched and put the word “Zestimate” into everyone’s vocabulary. The challenges that these valuations have caused for REALTORS® has been written about extensively over the years, but the real point we’re trying to focus on is the difference between AVMs and the RVM®. (Especially the “R” part of RVM®.)
First off, any AVM should be no more than a starting point. It’s the human knowledge and market experience that needs to be added to any calculation to make it accurate. By looking at AVMs, but allowing customization tools that took that knowledge into account, REALTORS® have at their disposal a better, more powerful and more accurate tool for the task of pricing homes. Simply put, the RVM® is an AVM, but with highly accurate data and better tools to allow the REALTOR® to add their market knowledge. Here’s a breakdown of the main differences:
- AVM = Automated Valuation Model: a value estimate calculated using publicly available information
- RVM® = Realtors Valuation Model®: a value estimate calculated using publicly available information plus MLS active, sold and off-market data
- The RVM®is available exclusively for REALTORS® via RPR (Realtors Property Resource)
The RVM® pulls directly from the MLS, giving it the most up-to-date data, allowing for the highest accuracy of any valuation product available. It also displays a five star confidence score rating, which helps agents make better decisions.
What’s the RVM® secret sauce? It’s you, the REALTOR®.
As good as the RVM can be, current data, confidence scores and a product backed (and owned) by the members of The National Association of REALTORS® aren’t the biggest factors that separate AVMs from the RVM®. The biggest point of differentiation is the name itself: “REALTORS®.”
Superior tech and tools are essential, but they’ll only get you so far. What really counts hinges on the human element. Sure, REALTORS® use the RVM®as a starting point, but it’s what they bring to the table in experience and expertise that really provides their clients with spot-on property pricing and home valuations. This “boots on the ground” approach is what truly separates the RVM® from all the others.
For example, all AVMs base their evaluation on properties being in “fair” condition. But in reality, properties vary. With RPR’s Refine Value Tool, A REALTOR® can walk through the home and make property condition assessments, up or down, in minutes. They can also correct outdated information, such as the number of bedrooms and bathrooms, square footage, etc. They can include major home upgrades, as RPR takes regional home renovation data from Zonda and refactors it at a local zip code level. (Zonda is a housing market research and real estate data analytics company that helps home builders and developers make smarter decisions.) And if the home needs repairs, those can be included. too. All of these elements factor in to reflect a change in value.
Additionally, REALTORS® have another resource in their tool belt, the CMA. After confirming or correcting a listed home’s facts, they can search for and adjust comparable properties to zero-in on an estimate of the home’s value based on recent sales in the neighborhood.
AVM-RVM® resources/questions and answers
For an in-depth look at how REALTORS® and the RVM® can work together, be sure to read: 5 Simple Steps to Building a Stunning and Compelling RPR® Seller’s Report.
And check out RPR’s FAQs on AVMs and the RVM®.