Lenders and brokers using Automated Valuation Models (AVMs) and homeowners using "free online home values" to determine the value of a property need to know what those results aren't telling them.

Whether unique features of a property might add to or detract from market value. So a computer returns an estimated value of $350,000. Did it account for the gas station next door? The trolley tracks  or bus stops nearby? The school district? The desirability of a home in a Cul-De-Sac versus one on a busy street?

How long ago the property was assessed. Many AVMs and free online services rely on public assessment records. In many area's, for example, assessments may only be required every three years — that means the value determined by an AVM may be nearly three years old in that case. When you use an AVM or free online service, you risk a lower or higher value than what the property is truely worth in the open market.

What makes a good comparable. A computer might compare your subject property to another property with similar square footage sold within the previous six months and within a mile from your property. The problem is, that  "comparable" property may be in a different, less desirable neighborhood, backs to a freeway, or has a cracked slab. Other problems a computer cannot see or understand is that the property may have been sold under duress, such as in a divorce situation or as an estate sale. Other none arm's length transactions, such as to a family member, would also have a determental effect on the value provided by and AVM. A computer simply does not know all the adjustments derived from market conditions that might need to be made to the sale price of a "comparable" property in order to develope a realistic value.

Whether a market is increasing or decreasing. Automated valuations use data from regional sales data so they do not get a true picture of the local or specific housing market. As a lender or investor, you don't want to get stuck with a property that's been overvalued by a computer because it believes that the market values within the subjects region are increasing but does not notice that the neighborhood in which the home is located is in decline. As a borrower, you don't want to be paying for a property that is worth less than what you owe within the first year. Accuracy matters...period.

What qualifications, designations, experience and education does the preparer of the valuation have. When you work with an appraiser, you can be confident we're highly qualified, ethical and prepared to complete your assignment professionally and with good judgment. Most of the time, you don't know the qualifications of whoever is behind those free online values, and they couldn't compare to an appraiser's if you did. So please realize, if you're relying on an automated valuation and not an appraiser's education, experience and expertise, you may be putting yourself at risk of a financial loss.