The Art & Science of Property Valuation -- Automated Valuation Models

It is no secret that sellers want to sell high and buyers want to buy low. But they often arrive at the negotiating table with very different ideas on price. A fair and objective property valuation can help buyers and sellers find common ground and streamline the negotiation process.

In the end, the property is worth what a buyer is willing to pay. But to help both buyers and sellers achieve their goals, both should have a fair and objective estimate of property value. Unfortunately, even objective estimates are still estimates, and there is no way to assure 100% accuracy:

* Appraisals performed by a certified appraiser are not 100 percent accurate.

* CMA's (Comparable Market Analysis) and BPOs (Broker Price Opinions) performed by a licensed broker or agent are not 100 percent accurate.

* AVM (Automated Valuation Model) technology is not 100 percent accurate.

All these methods, when properly executed, can provide a good indication of value. Estimating value is a combination of art and science. Regardless of how scientific the approach, the actual sale price is subject to the unique variables of each property transaction: property condition, upgrades, current market conditions, circumstances of the sale and individual tastes.

For property owners, pricing correctly is a key to a successful sale. Under-pricing can result in a fast sale, but carries the risk of leaving money on the table. Sellers who price too high may find their properties lingering on the market, and statistics show that values can erode at a rate of about 1.5 percent per month. Longer sales also increase the likelihood of a "distressed sale" when sellers become frustrated or encounter difficult financial circumstances.

Likewise, buyers should avoid emotional purchases. Overpaying because of "falling in love" with a home is common. Homekeys' ValueKey Technology can help establish an objective, unemotional baseline for buyers and sellers so distressed sales and emotional purchases become the exception, not the rule.

The science of AVMs

To determine a good baseline value for a property, use Homekeys to search thousands of property records for comparable sales or "comps." Homekeys' ValueKey tool uses advanced statistical models and proprietary algorithms and formulas to find the best comparable properties available. In addition to property characteristics, the system evaluates how recent comparable sales are and how close properties are from the property being evaluated. Once a base property value estimate is determined, it's time to check active listings to see what similar properties are selling for. ValueKey searches both owner- and broker-offered active listings to find the most comparable properties available.

The art of AVMs

The art portion of estimating value begins with understanding how comparable sales and active listings compare to the property being evaluated. Since they are nearby, it's a good idea to drive by comparable sales and listed properties to see how they compare. To help you stay organized, you may want to use a buyer checklist when visiting properties.

After researching comparable sales and active listings, it's time for the personal touch. Sellers know their own property and neighborhood better than anyone, so they are able to adjust base values according to individual property characteristics. Buyers can make similar adjustments as they visit properties to help formulate an asking price.

Depending on your research, a "market adjustment" may be warranted. If active listings are priced higher than your base estimated value, an upward adjustment may be appropriate. If prices are lower, a downward adjustment might be in order.

Finally, ValueKey enables buyers and sellers to make other value adjustments based on individual property characteristics and condition. Based on a seller's knowledge or a buyer's research, appropriate value adjustments can help both parties arrive at a fair selling price.

And though no property valuation system is perfect, AVMs can provide objective valuation estimates quickly and inexpensively, and the technology is improving all the time. As AVM technology continues to evolve and improve, it may prove to be a key to less-stress, more enlightened real estate transactions in the future.

Manuel Iroala is President and CEO of Homekeys. Charles Warnock is Marketing Communications Manager at Homekeys, a South-Florida based real estate and technology company. This article can also be found at http://www.homekeys.net

In The News:

Future of commercial real estate in India - People  Construction Week Online India
Pune's real estate market post pandemic - People  Construction Week Online India
The 10 best cities for lab real estate  Becker's Hospital Review
ESG in real estate - People  Construction Week Online India

Investing in the Baltic Tiger: What Has Estonia Got to Offer?

Estonia's reputation is growing within the property investment market. Rising... Read More

The UK has Gone Property TV Show Crazy!

The UK has gone property TV crazy. There are now... Read More

Reinventing Real Estate, Part 2: Online and Empowered Consumers Are Taking Charge and Paying Less

Demanding consumers"Internet buyers tend to be better informed on market... Read More

Prepare Your Rental Property for Occupancy

Among your many responsibilities as a landlord, the law provides... Read More

Dont be Tempted by We Buy Houses (Updated)

Do you want to sell your home right away? Don't... Read More

A Singles Game of Real Estate

This discussion leans toward answering questions asked most often by... Read More

Apres-Ski

European tax haven Andorra enjoys the same fiscal benefits as... Read More

Investment Real Estate Made Easy ? Make the Most from Each Investment Dollar

When it comes to buying investment real estate, there are... Read More

How to Buy Your Own Home

Buying Your First HomeBuying Your Own Home isn't nearly as... Read More

Seller Objections To Lease Purchase

A large percentage of the mail we receive are from... Read More

How To Build A Million Pound Property Portfolio

Looking to quickly build a million pound property portfolio? You... Read More

Selling Your Own Home ? Pet Issues

If you are selling you own home, you need to... Read More

Realities of Real Estate Investing

If you are anything like me, you are always looking... Read More

Boston Real Estate ? You Still Have Considerable Control Over the Sale of Your Boston Home

Boston real estate is a hot topic. Daily newspaper articles... Read More

Property Investing Secrets 3

Property Investing Secrets: When you Make Property Easy to Buy... Read More

Secrets of Making Money from Real Estate - Part 2

Leverage: With real estate, people and companies will lend you... Read More

Before You Buy A House ? Top 10 Tips

There are serveral things you need to think about and... Read More

Why Real Estate Investment?

Why should you invest in real estate? Well, investing in... Read More

Real Estate Investing - Protect Your Privacy

An irate tenant or disgruntled home-buyer, with the help of... Read More

Real Estate Growth: How Long Will It Last?

There has been speculation in the media recently about the... Read More

Property Auction & Why You Should Run A Mile From Them

That's A Funny Thing To Say About Property Auctions; They're... Read More

Working With Your Real Estate Attorney

Purchasing or selling a home will probably be one of... Read More

Miami Property Booming for Foreign Investors

Miami tourism is growing and so is the Miami property... Read More

Real Estate Investing By The Numbers

Just like most things real estate investing can be broken... Read More

Timing Is Everything When It Comes To Buying Homes

The old adage that "timing is everything" especially applies to... Read More