| People naturally want to save money where they | | | | tax assessor valuations to develop a ratio, or a |
| can, and those wanting to sell or refinance their | | | | statistical model using actual sales. The methods vary |
| homes are no exception. Perhaps the most important | | | | by AVM. The cost for these products ranges from |
| question anyone thinking about doing these things | | | | about $20 to $40. These are often used by |
| can ask is how much the home is worth on the | | | | mortgage companies, but a few consumer products |
| market. The value of the property is obviously critical | | | | are available to the general public. |
| to selling or buying, and will be a primary factor in | | | | We have tested two popular AVM products and |
| obtaining a loan. An appraisal can answer this | | | | found them wanting. In one instance, a list of recent |
| question, but that service isn't cheap. A typical home | | | | comparable sales was purchased from a consumer |
| appraisal fee will run anywhere from $250 to $400 | | | | AVM site and compared to actual sales from the local |
| depending on where the property is and what it | | | | MLS. Out of 12 sales provided by the AVM, not one |
| contains. Naturally, many people seek an alternative | | | | of them matched MLS records for the same |
| to this fee and a search of the internet will reveal a | | | | properties, and some of the selling prices shown in |
| lot of companies and web sites that offer a free or | | | | the AVM list were off target by as much as 100%. |
| relatively inexpensive solution. | | | | In another instance, a different AVM produced a |
| Many web sites advertise "free" appraisals. These are | | | | range of value from $216,000 to $489,000 for a |
| typically web sites that ask a home owner to provide | | | | home, which is hardly a useful or informative range. |
| a property address and personal contact information. | | | | The secondary mortgage market has taken notice of |
| These sites are usually what are known as "lead" | | | | inconsistencies like this and mortgages based solely |
| generators for real estate brokers. After the home | | | | on AVM valuations have been subject to considerable |
| owner submits the information online, they are later | | | | discounting. |
| contacted by a real estate agent who provides (or | | | | While free to cheap value solutions may serve some |
| offers to provide) a "competitive market analysis" of | | | | purposes, it is still a matter that you get what you |
| the home, based on recent sales and listings of | | | | pay for. A poor appraisal can end up costing |
| neighborhood properties. But the real estate broker | | | | someone many thousands of dollars. CMAs and |
| providing this information is going to want to meet | | | | AVMs where no one has actually inspected the |
| with you and try to convince you to list your | | | | property inside and out run the risk of being |
| property for sale with them. In some instances, the | | | | inaccurate for obvious reasons. If you live in a |
| owner may be contacted by several agents. These | | | | cookie-cutter neighborhood of very similar homes, |
| types of valuations are generally quite good, but no | | | | mostly built by the same builder, these low-to-no |
| agent understandably wants to provide this service | | | | cost products can be a worthwhile solution to your |
| for free and definitely not to owners who are not | | | | value problem. However, most homes are not |
| interested in selling. Like anyone else, brokers much | | | | exactly alike and feature different levels of condition |
| prefer not to work for free. | | | | or decorative appeal. It takes professional judgement |
| Another possibility is inexpensive electronic appraisals, | | | | and experience to provide a reliable and reasonable |
| known in the mortgage industry as "AVMs" or | | | | estimate of value. Most buyers and sellers have |
| Automated Valuation Models. These are computer | | | | found that the fees charged by professional |
| generated value ranges based on various techniques, | | | | appraisers are well worth the money. |
| such as comparing a sample of actual recent sales to | | | | |