What Is an AVM? 7 Questions About Automated Home Values

An automated valuation model, or AVM, uses property and market data to estimate the value of a home.

You may encounter AVMs when checking a home’s estimated value online, researching a property or working through certain parts of the mortgage process.

They’re useful because they can produce estimates quickly and at scale. But an AVM is still a model. It doesn’t necessarily know that a kitchen was remodeled last year, a roof needs replacement or a unique view makes one home more desirable than another.

Key Takeaways

1. An AVM estimates home value using data and statistical modeling rather than a traditional appraisal.
2. AVM accuracy depends heavily on the quality of the data and how comparable a property is to nearby homes.
3. A consumer home-value estimate is not the same thing as the valuation a mortgage lender ultimately accepts.

1. What Is an Automated Valuation Model?

An automated valuation model is a computerized system that estimates the value of real estate.

AVMs generally analyze large amounts of information that can include:

• Recent property sales
• Public property records
• Property characteristics
• Location
• Comparable homes
• Historical price patterns
• Current market trends

The exact inputs and formulas vary by AVM provider.

Instead of an appraiser developing an individual opinion of value for one property, the model uses data and statistical techniques to generate an estimate automatically.

Movoto uses automated estimates on many property pages to give users a starting point for understanding potential home value.

2. How Is an AVM Calculated?

There isn’t one universal AVM formula.

Different models can use different datasets, weighting systems and statistical techniques.

Broadly, an AVM looks at what is known about a property and compares it with patterns in the surrounding market.

For example, a model may consider:

• Square footage
• Number of bedrooms and bathrooms
• Property type
• Lot size
• Year built
• Prior sales
• Nearby sales
• Tax and assessment records
• Market price trends

The model can then estimate what the property may be worth based on relationships found in that data.

That means the estimate is only as useful as the information available to the model.

3. How Accurate Is an AVM?

AVM accuracy varies by property and market.

A model can have an easier time estimating a home when there are many recent sales of similar properties nearby.

For example, a subdivision containing dozens of similar homes may provide the model with substantial comparable data.

An estimate can be more difficult when the home is:

• Highly customized
• In a rural area with few sales
• On an unusual lot
• Substantially renovated
• In poor condition
• Much larger or smaller than nearby properties
• In a market where prices are changing quickly

An AVM also may not know about a recent renovation or condition issue until information reflecting that change becomes available in its data.

That’s why an automated estimate should generally be viewed as a starting point rather than a guarantee of what a property would sell or appraise for.

Why Does Movoto Show a Home Value Range?

Home value isn’t always best understood as one perfectly precise number.

Movoto property pages can show both an estimated value and an estimated range.

The range helps communicate that there is uncertainty around an automated estimate.

A home could ultimately sell above or below that range depending on property condition, buyer demand, negotiation and market conditions.

4. How Should You Use an AVM Estimate?

Use an AVM as an initial reference point rather than as a recommended listing price or offer price.

For a homeowner considering selling, an estimate can help answer an early question: Approximately what might my home be worth?

From there, you can investigate more closely by looking at:

• Recent comparable sales
• Current competing listings
• Property condition
• Recent renovations
• Local inventory
• Buyer demand

A real estate agent can also prepare a comparative market analysis, or CMA, using local market evidence and their knowledge of the property.

For buyers, an AVM can provide another data point when researching a listing, but it shouldn’t replace your own analysis of comparable sales or a lender’s required valuation process.

Is an AVM the Same as Market Value?

Not exactly.

An AVM is an estimate produced by a model.

Market value generally refers to an opinion or indication of what a property could command in an open and competitive market under applicable valuation assumptions.

The price a home actually sells for can also differ from an AVM because buyers and sellers negotiate based on factors the model may not fully capture.

Those could include:

• Property condition
• Competition among buyers
• Seller motivation
• Seller concessions
• Unique property features
• Timing

An estimate can help inform a pricing discussion without determining the final market outcome.

5. Can You Use an AVM to Get a Mortgage?

This requires an important distinction.

A consumer-facing home value estimate on a real estate website is not itself a guarantee that a mortgage lender will accept that value for your loan.

But mortgage lenders and secondary-market systems can use automated valuation technology as part of certain mortgage valuation decisions.

Federal regulators have specific quality-control requirements for AVMs used by covered mortgage originators and secondary-market issuers to determine collateral value for certain loans secured by a borrower’s principal dwelling.

Those standards address areas such as:

• Confidence in the model’s estimates
• Protection against data manipulation
• Conflicts of interest
• Testing and review
• Compliance with nondiscrimination laws

Automated valuation technology is therefore part of today’s mortgage system, but that does not mean the estimate you see on a property-search website automatically becomes your lender’s value.

Can a Mortgage Close Without a Traditional Appraisal?

Potentially.

For eligible conventional mortgages, Fannie Mae’s Desktop Underwriter can issue what it now calls value acceptance.

When the lender exercises an eligible value acceptance offer, Fannie Mae accepts the lender-submitted property value and a traditional appraisal is not required.

Fannie Mae also offers value acceptance + property data for certain eligible loans. In those cases, property information is collected, but an appraisal is still not required.

Other loans may require a traditional, hybrid, desktop or other permitted appraisal process.

The lender and mortgage program determine which valuation method applies.

6. What Is the Difference Between an AVM, CMA and Appraisal?

All three can help answer questions about property value, but they are not interchangeable.

Automated Valuation Model

An AVM can generate an estimate quickly without requiring a person to individually analyze every property.

Its strength is its ability to process large amounts of data efficiently.

Its limitation is that the model may not capture every physical or market-specific characteristic of an individual home.

Comparative Market Analysis

A CMA generally uses recent comparable sales, active listings and local market conditions to help estimate a potential listing or offer range.

Real estate agents commonly prepare CMAs for buyers and sellers.

A CMA is not an appraisal and doesn’t become the lender’s collateral valuation simply because an agent prepared it.

Appraisal

An appraisal is an independent valuation completed by an appraiser for a specific purpose and under applicable professional standards.

Traditional appraisals often involve an interior and exterior property inspection, but not every modern appraisal assignment works that way.

Depending on the mortgage and valuation option, appraisal methods can include traditional, desktop and hybrid approaches.

Our guide to what a home appraisal is explains those valuation methods in more detail.

AVM vs. Appraisal: Which Is More Accurate?

There isn’t a useful universal rule that every appraisal will always produce the “correct” number while every AVM will not.

They are different valuation tools.

An appraiser can analyze property-specific factors and exercise professional judgment that an automated model may have difficulty capturing.

An AVM, meanwhile, can analyze a large volume of market information consistently and quickly.

The appropriate method depends on why the property is being valued and the requirements of the transaction.

For a homeowner casually checking potential value, an AVM may be sufficient as a starting point.

A mortgage transaction may require a much more formal valuation process.

7. Where Does the Property Information Come From?

AVM estimates depend on underlying property and market data.

Depending on the model and property, that can include information originating from:

• County or local property records
• Tax records
• Recorded sales
• Listing information
• Other real estate datasets

Data availability differs by location.

Local governments and other data sources also update information on their own schedules, so a property page may not immediately reflect a recent change.

That can matter when a home was recently remodeled, subdivided, expanded or otherwise changed in a way that hasn’t yet reached the underlying records.

How Often Is an AVM Updated?

There isn’t one nationwide update schedule for every piece of property data.

AVMs can be recalculated as new information becomes available, but the underlying sources may update at different times.

For example, a recorded sale may become available on a different schedule from a county assessment update or new listing information.

That means an automated value may change over time as the model receives additional market or property data.

Can You Update Your Property Information on Movoto?

Some Movoto property pages currently provide an “I’m the Owner” option that allows homeowners to begin an owner-related property flow.

However, some information displayed on property pages comes from public records or other external data sources.

If an underlying government record is incorrect, correcting the information with the county recorder, assessor or other original source may also be necessary.

Available owner controls can vary by property and by the type of information involved.

Why Doesn’t Every Property Have an AVM?

A useful automated estimate requires enough reliable information for the model to produce a result.

A property may lack an estimate when sufficient data is unavailable or when the model cannot produce an estimate with an acceptable level of confidence.

This can be more likely with:

• New construction
• Very unusual properties
• Areas with limited sales activity
• Properties with incomplete public records
• Locations where less market data is available

A missing estimate doesn’t mean the property has no market value.

It simply means an automated model may not have enough information to produce a useful estimate.

Can Two AVMs Give Different Home Values?

Yes.

Different companies can use different:

• Data sources
• Comparable properties
• Update schedules
• Statistical models
• Weighting methods

As a result, two automated valuation models can produce different estimates for the same house at the same time.

That doesn’t necessarily mean one of them is broken.

It reflects the fact that estimating home value involves both data and methodology.

Can Renovations Increase an AVM?

Potentially, but not necessarily right away.

An AVM cannot physically walk through your home and see a renovated kitchen, finished basement or new addition.

The model needs information that reflects those changes.

If updated square footage, permitted improvements, a later sale or other relevant information eventually appears in available datasets, the model may incorporate it.

Until then, the automated estimate may not fully reflect the renovation.

Should You Use an AVM When Pricing a Home for Sale?

It can be one useful starting point.

Before choosing a list price, also consider:

• Recent comparable sales
• Competing homes currently for sale
• Property condition
• Recent improvements
• Local inventory
• Current buyer demand

A CMA from a local real estate agent can add property-specific and market-specific context that an automated model may not capture.

Pricing a home solely from one automated estimate can overlook meaningful differences between your property and the data behind the model.

Should You Use an AVM When Making an Offer?

An AVM can also provide buyers with another reference point, but it should not dictate your offer.

Before making an offer on a house, compare the property with recent sales and consider its actual condition, competition and your own budget.

The eventual mortgage appraisal or other lender valuation can also differ from the AVM you saw before making the offer.

If that lender-supported value comes in below the purchase price, you may face an appraisal gap.

Bottom Line

An automated valuation model uses property and market data to estimate the value of a home quickly.

That makes AVMs useful for early research, but the estimate shouldn’t be confused with a guaranteed sale price or with whatever value a mortgage lender ultimately accepts.

Accuracy depends on the data available, the property’s characteristics and the model itself. Unique homes or markets with limited comparable sales can be especially difficult to value automatically.

Use an AVM as one data point. For a major pricing, buying or financing decision, compare it with recent sales, local market information and whatever valuation process applies to the transaction.

FAQ

What does AVM mean in real estate?

AVM stands for automated valuation model. It is a computerized system that uses property and market data to estimate real estate value.

Is an AVM the same as an appraisal?

No. An AVM produces an automated estimate using data and modeling. An appraisal is an independent valuation completed by an appraiser for a specific assignment.

How accurate is an AVM?

Accuracy varies. AVMs generally have more information to work with when a property has many recent comparable sales and complete records. Unique properties and data-poor markets can be harder to estimate.

Can a mortgage lender use an AVM?

Yes, automated valuation technology can be used in certain mortgage valuation processes. However, the consumer estimate shown on a real estate website is not automatically the value your lender will use.

Can you get a mortgage without an appraisal?

Potentially. Certain eligible conventional mortgages can receive Fannie Mae value acceptance or other permitted appraisal alternatives. Eligibility depends on the loan and underwriting results.

Why is my AVM different from my appraisal?

The two valuations may use different information and methodologies. An appraiser can analyze property-specific characteristics and professional market evidence that an automated model may treat differently or not have available.

Why did my home value estimate change?

An AVM can change as new sales, property information and market data become available or as the model recalculates the estimate.

Why doesn’t my house have an AVM?

The model may not have enough reliable property or market information to generate a useful estimate. This can happen with unusual properties, new construction or areas with limited sales data.