One of the hottest discussion topics in real estate today is the presence of automated valuation models (AVM) — the estimated property prices on third-party search sites. Those price estimates are largely determined by an algorithm, as opposed to a real estate professional, and they often miss the mark when it comes to the final sales price.
Real estate agents are continually frustrated by consumers who see these price estimates and take them as a gold standard for what the asking price should be.
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Consequently, agents are spending too much of their time addressing the misconceptions about AVMs, rather than focusing on the more important conversations they should have with their clients.
The reality is that these AVMs aren’t going anywhere anytime soon, and since they are now a part of the real estate landscape, here’s an approach real estate agents use to make the most of them.
The best AVM approach to take
Let’s take the typical scenario where a client comes to you already having looked up what their house is worth on a third-party search site. They have that number firmly in mind, and now your hurdle is to get them to see a price that is more in line with the local market trends.
Typically, a real estate agent’s response at this point in the conversation is to point out the fundamental flaws with AVMs and steer the conversation toward why they — or any agent — are more qualified than a computer algorithm to come up with an estimate.
While this might be true, one drawback is the client’s skepticism that comes when they hear an agent trying to defend their role in the process.
Instead, try this approach.
When clients mention they saw the estimate on a website, pull out your own stack of AVMs from as many search sites as you can find.
Why it works
Most consumers stick to one — maybe two — search sites total. When an agent presents clients with half a dozen other price estimates, not only does he or she demonstrate being well-versed in what’s going on online, but they also immediately prove that any individual AVM is just a ballpark figure.
When a client sees six different price estimates for the same property, they can’t help but realize that the one they researched isn’t set in stone.
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This little preparation helps agents tremendously during a listing presentation because they don’t have to spend nearly as much time correcting misconceptions or trying to find that delicate balance of proving their value as an agent without coming across as defensive.
In addition to the free, public sites available on the Internet, Cloud CMA and Homesnap both provide comparative market analyses and include price estimates in their reports.
In short, don’t just use AVMs. Overuse them.
Andrew Strauch, vice president of product innovation and marketing at MRIS, has more than 20 years of experience in product management, product marketing and engineering.