What Does AVM Stand For In Real Estate?

What does AVM stand for in real estate? Well, it's an automated valuation model. So many people use them. Some people actually build their own. But having automation, as we know in this day of AI, is critical. So a few things I want to share with you. Just the fundamentals of AVM and what is it really used for? How have people used it? The second thing, the advantages and disadvantages of using a model versus building your own. And then last, the best practices of effectively incorporating AVM into your real estate planning. So let's start. And I'm actually going to read some of this because it's very definition specific. And I want to make sure you have the accurate information. So what is AVM in its definition? It is an automated valuation model. It's a service that utilizes mathematical modeling combined with databases of existing properties and transactions to estimate real estate values. AVMs analyze various factors such as the property's characteristic, market trends, comparables in the sales in the market, and generates accurate valuations based on the data. But again, what you know about data is bad data in is bad data out, meaning sometimes they don't work. And when you're in really, really what I call divergent markets, like where we are here in Northern Nevada, I mean, we have from trailer parks to multi-million dollar properties, and they may be at the corner of a property. So you have very different valuation structures because of that, as well as you have houses in the same neighborhoods as four plexus, 16 plexus, 12 plexus, makes it hard that single family to have a good valuation in a big apartment neighborhood. So some of that just as part of just knowing real estate and knowing what you're looking for and what you're really wanting. So the first thing let's talk about are the fundamentals of AVM and their significance. So they employ statistical models and algorithms to process data from public records, MLS, typically real estate databases providing a quick property valuation without any need for physical inspections. Although they're widely used by mortgage lenders, real estate investors, property appraisers, just to speed things up, including even government agencies. And the third tip is they're used in assessing the value of the property, offering significant value as far as speed. But again, you still, in my opinion, need to do some of your own due diligence. At least have someone go to the property. I would do some level of a walkthrough. If you're going to take it without any contingencies and no inspections, good luck with that. I've done that before. I've had good luck and I've gotten a can of worms because I didn't get the inspection thoroughly done. So it's up to you how deep you want to go into these and what you're going to do with the property. If you're just going to do just a very basic fix and flip, you probably don't need to go in depth. If you're actually going to keep it for your own family buy and hold, I'd go further into depth. The advantages obviously are faster valuations. You at least can get more going. One of the first homework assignments I give to all my real estate clients if they want to become a real estate investor is start putting at least five to eight offers a week into the market. So you're at least used to moving volume and contracts. So put contingencies in them. You're not going to get stuck with all these properties. But if you're not even in the process and in the speed of being able to lay down valuations, give offers, put through contracts, you're not even beginning the game. You can't buy a piece of real estate unless you put in an offer through a contract. Again, AVMs probably don't really look at the condition. That's the biggest disadvantage is they don't know the current condition. I know a property that I own, it's still from 2017 are the pictures because there have been no updated pictures of what the remodel has been, what the upgrades have been, all the enhancements to the property. So it's not going to have a true valuation. Someone who just came out gave me a three-time valuation on that property over what it says on Zillow, for example. So you're not going to get up-to-date current conditions. Again, somebody on the ground should go out and see the property. So again, between the disadvantages and advantages, I would say use it and like anything, trust and verify, right? So trust that it's probably in the ballpark, but verify your findings. Now, before I go to the finale and really give you some of the best practices, I want you subscribing to our channel, be here five days a week. It's a family-friendly channel. It was designed nearly like four years ago, and we are here five days a week intentionally for you. Anyone at least five years and up can listen. They may not understand the content, but I can tell you between zero and 13, it is absolutely imperative that you start absolutely getting this conversation about being an entrepreneur, being a wealth builder in your family homes. If you truly want a legacy and a different kind of behavior responsibility that comes with owning a legacy estate. So be here, make comments. If there's something we're not talking about and you want, like this was a very specific comment that someone wanted me to talk about AVMs. So we got that out of the comments. So whatever you want, put it in the comments, but make sure you check my playlist and my search bar before we have content in so many categories and look forward to it. So the last point I want to bring up just some best practices. Best practices is again, use as a preliminary tool just to get estimates. Again, go out and verify the data inputs. Many times they're not up to date to smaller, more remote counties. I find the information is not up to date. It's really outdated. The APN numbers are wrong. I mean, I've seen a lot in remote counties. And then the last is just, again, being highly aware of the limitation. So would I make a sole decision to buy a piece of property on an AVM model? Me? Probably not. I would trust, verify, and have someone in the street do the actual inspection and be out looking at the condition of the property and then what's your intended use for it. So we have more and more to always talk to you about. If you have any questions, go to asklaurel.com, A-S-K-L-O-R-E-L. Ask a question, make a request. We'll be back tomorrow.