An automated valuation model or AVM is a service that provides a combination of statistical and mathematical modeling with a database of available properties. This system also allows its users to assess property values. This system is extremely useful for real estate clients when it is necessary to go through options on their hands.
How does it work?
AVM is a technologically driven system. It works by running a property algorithm, hedonic model, and repeat sell index which helps it to weight, analyze and generate the property price. In addition, this system also offers the option of including mortgage rates, loan equity, and credit loss. AVM can be used to calculate the value of both commercial and residential properties. This system offers its service to a variety of clients like mortgage lenders, real estate agents, brokers, financial institutions, etc.
Advantages of AVM
AVM is similar to appraisals but more convenient. This is automatic and needs
no human effort. Due to being software-based, this application saves time and money. It does not require going places to collect data on other properties, using this method the comparison with other properties can be done.
Disadvantages of AVM
It requires high-quality data and enough information to run an AVM properly. So, sometimes it is difficult to get effective results due to a lack of knowledge. One of the downsides of AVM is it presents an average calculation of price. This application is unable to consider the real-life situation that affects the market. As AVM works on existing data, it cannot calculate the price of a new house. AVM collects data on these old houses. As a result, it shows faulty results for new houses.