House being scanned on left with data paper to the right
Illustration by Lanette Behiry/Real Estate News

Automated valuations a 'conversation starter' for agents 

Instant home values (like Zillow's Zestimate) are getting better, and can be a tool for underwriters and savvy agents.

February 22, 2023
4 minutes

Key points:

  • Automated valuation models, known as AVMs, tap into multiple databases of information to deliver instant estimates of a home’s value.
  • As the technology improves, AVMs are used more often by real estate professionals, consumers and financial institutions.
  • Agents can use valuations like the Zestimate as a marketing tool or to engage with existing clients.

Tim Macy, an agent with Real Broker LLC in San Antonio, sends automated home value estimates to clients as a way to keep in touch. 

They get to see how much their property might fetch on the market, and he can tell who's clicking through for more information. "The estimate is a great conversation starter to see who's interested in the value of their home," Macy said.

Macy uses HomeBot as a marketing and sales tool to connect with potential sellers via computer-generated emails that give a home's estimated value. He follows up with an offer to provide an in-depth review of their property. "It's easy for them to request a more precise value," he said. 

'Appraisal modernization' across the industry

Automated valuations models (AVMs) — which tap a database of public records and sales information to generate home value estimates — have been around for years. But as the technology improves, they are gaining broader acceptance and use by real estate professionals, consumers and even financial institutions. 

Lenders increasingly rely on AVMs for at least part of the underwriting process. Leading commercial AVM providers include CoreLogic, the Federal Home Loan Mortgage Corp. (Freddie Mac), VeroVALUE and Equifax. Each has proprietary software for providing estimates on homes, and the companies claim it's fast, affordable and statistically reliable. "We're constantly innovating," said Scott Reuter, Freddie Mac's chief appraiser. "We call this appraisal modernization." 

​​The automated appraisals filter out biases that people may bring to an appraisal. "Studies have shown that property appraisals tend to be biased upwards, and over 90 percent of the time, either confirm or exceed the associated contract price," according to Alexander N. Bogin and Jessica Shui, analysts with the Federal Housing Financing Authority.

Love it or hate it, Zestimate-watching remains a popular pastime

Since Zillow introduced its Zestimate in 2006, consumers have latched onto the idea of instant valuations. Consumer-facing AVMs are popular with home buyers and sellers — and the curious browser who wonders what their friend's or colleague's home is worth.

The Zestimate may be the best known consumer-facing AVM, but other real estate websites offer their own versions, including Redfin with its Redfin Estimate and, which displays AVMs from multiple third-party providers.

Redfin looks at historical pricing data and considers real-time demand and market trends when calculating its proprietary estimate. 

RE/MAX also offers third-party AVMs for consumers but cautions that there is a "wide margin for error." Instant estimates are not 100% accurate; there is no in-person visit to tour a property and review its condition and features.

The company invites consumers to seek out a more in-depth comparative market analysis that includes the home's features and condition, competing properties, market trends and recent sales in a neighborhood.

Valuations as a marketing tool

An AVM's accuracy depends on the market and neighborhood, Macy said. 

"Consumer-facing AVMs work well in neighborhoods where houses are very similar and there is a high volume of recent sales. The estimator can pull good data to see what a home is worth."

In the cooling real estate market, Macy sees the price of home sales fall below the online home sales estimates that consumers find on real estate websites. "Zillow is pulling data from home sales three or six months ago," Macy said.

But the discrepancies do not concern him. Macy said he welcomes the questions and curiosity by consumers. He sees potential clients engaged and activated by their queries on Zillow and other home search portals.

"Every consumer who looks at an automated value model and has an opinion about it presents an opportunity," Macy said. "There are a lot of agents who have disdain for it. I use AVMs as a marketing tool for my business."

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