Appraisal vs AVMs

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Dave Towne

A Flipper Transaction - Appraisal vs AVMs... Are AVMs Reliable?

…the ‘flipper’ realized that the list and contract price was way too high…

I just saw an article titled “Realor.com now providing third-party home valuations” about Realtor.com now using a ‘new’ service to provide a home value.

Just for grins, I thought I’d do this essay using one of my recent assignments for the case study, which was in Bellingham, WA.

The home was undergoing renovations by a ‘flipper’, and it had a signed contract for a high $$ amount. The report was written ‘subject to’ completion of the repairs/renovations. During the initial inspection, the ‘flipper’ was present and doing some of the work.

After doing necessary comparable research multiple times to be sure I had not missed any relevant sales, I did the report and concluded the value at $25,000 LESS than the contract price, which also was the list price.

Yesterday, I did the 1004D Completion for this property. The ‘flipper’ was also present. Not a word from the ‘flipper’ or the client has been said about my concluded value!

Today, I decided to jump onto Realtor.com to see what it shows for that home. Their figure is 2%, or $9,300, higher than my concluded value.

Apparently the ‘flipper’ realized that the list and contract price was way too high!

Then I decided to check the Big Z, Zillow, to see what their magical figure is. Their ‘Zestimate’ is $4.00 higher (yes, 4 dollars) than the list price which I didn’t support! But their range starts $1,000 higher than my appraisal value, and goes up to $49K higher. Gee, how convenient… as the Zmate is right in the middle of that.

I also checked my home with Zillow, which does not show the bath count correctly, but claims the home is worth just a bit north of $400K. But sales they use to justify the value are screwy.

Going back to Realtor.com for my house, they show widely divergent values ranging from $342,450 at the low end to $471,800 at the high end.

I guess this proves that AVMs are highly reliable in determining home values… NOT!!

By the way, after getting the home renovated and sold, the ‘flipper’ will make about $65,000 on the transaction. Not too shabby! (And no, it was not a featured property on HGTV!)

Image credit flickr - Sam Beebe
Dave Towne

Dave Towne

AGA, MNAA, Accredited Green Appraiser - Licensed in WA State since 2003. Dave Towne on e-AppraisersDirectory.com

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3 Responses

  1. Avatar Bill Johnson says:

    If you do residential appraising in San Diego, at times 25 to 50% of your neighborhood sales are current flips, or have been flipped in the prior 3 years. Perhaps this is a big city, or a destination city issue, but flipped properties are like candy where I’m from. Dealing with C4 refinance assignment is always fun when surrounded by C2 investor flips.

    As it relates to investor numbers ($), its not unusual for the acquisition price to sales price to vary by +/- $200,000.

    Concerning AVM’s, Zillow, etc., all are garbage.

    Seek the truth.

    2
  2. Avatar Scott Taylor says:

    time to find another house………….

    2
  3. Baggins Baggins says:

    Corelogic Matrix. Now denies appraisers the ability to have the basement total sizing next to the agla sizing figures in the variety 1 line overviews. You can see basement size figures on screen and do limited screen grabs but those basement sizing fields are no longer exportable or printable data points for large data sets, for additional analysis regardless of your analysis approach. All one can print out and export now is a basement yes/no option.

    No more easy identification within comprehensive complete data sets if units have basements or not, identifying if units may have improperly entered size for garden levels, no more easy identification if units may have agla add ons like for ranch up vs down size comparisons.

    Corelogic can’t seem to furnish a finished product and keeps making research more and more difficult for those not seeking automated avm results.

    This avm’s are reliable thing is fizzling fast with every new instance of ‘improved service’ data systems restructuring. Was it a RESO requirement to completely restructure everything and omit essential data? First step of research, define a house as a house. Then remember multi family is not necessarily income, it just means a sf residence is attached to something else. The list of butchery is indeed long.

    On the bright side, independent researchers without direct access to MLS, those people whom rely on these tech relay systems, they don’t stand a chance.

    0

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Appraisal vs AVMs

by Dave Towne time to read: 2 min
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