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What Is An Automated Valuation Model (AVM)?

March 25, 2024 3-minute read

Author: Sarah Sharkey


Have you ever wanted to know the value of a property? Instead of going through the expense of hiring an appraiser, you can take advantage of an automated valuation model.

Let’s take a closer look at what an automated valuation model is.

Automated Valuation Model (AVM): Defined And Explained

An automated valuation model (AVM) is software that uses data and algorithms to estimate the value of residential and commercial real estate. AVM uses mathematical or statistical modeling and a combination of existing databases to estimate property value.

Some AVM providers, such as Freddie Mac and Equifax, charge for the service, but you can use free AVMs on sites like Zillow. If you ever looked up the “Zestimate” of a property, you’ve already used a well-known AVM. Rocket Mortgage® doesn’t offer an AVM at this time.

Because an automated valuation model is based on its existing data, its estimates are only as accurate as the property details in its database. An AVM will likely produce inaccurate property valuations if the data is outdated, incomplete or incorrect.

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How Do Automated Valuation Models Work?

AVMs use mathematical formulas, property details and property database information to generate reports on a property’s estimated value. AVM reports are calculated based on several data points, including:

  • Property sales history
  • The year the home was built
  • Tax assessor’s value
  • Property features like size and number of bedrooms
  • Sales history of similar properties

With that data, an AVM uses a mathematical model to estimate a property’s value.

Because an AVM doesn’t consider the condition of the property when estimating its market value, the estimate may not be entirely accurate.

AVM Pros And Cons

Using an AVM to estimate a property’s value offers advantages and disadvantages.


Overall, AVMs offer a faster and easier way to estimate a property’s value. An AVM can save you time and effort when you need an initial estimate fast, like if you’re trying to figure out whether a house is overpriced.


AVMs are only as good as their data. They need an enormous amount of high-quality data to operate successfully. Also, AVMs don’t factor in a property's appearance. Any variation in the condition of a property can result in a discrepancy between the estimate and actual property value. Although AVMs factor in the sales price of comparable properties, when valuing unique properties, their accuracy can lessen.

Automated Valuation Model Vs. Appraisal: What’s The Difference?

Home appraisals are traditionally conducted by licensed appraisers who physically inspect a property to collect details on a home’s condition and determine its fair market value. When a human appraiser is involved, a property valuation can be influenced by human error and bias. Still, human appraisers are widely considered far more accurate than AVMs, and a conventional lender will require a full appraisal for a home purchase.

Although the property details AVMs use in their calculations can vary, the table below provides a general overview of the typical ones AVMs use to estimate a home’s market value compared to the factors in a professional appraisal.


Typically Factored With An AVM

Typically Factored With An Appraisal

Tax records/Tax-assessed value



Mortgage records



Past home and comparable properties sales prices



The year the home was built



Square footage and number of rooms



Safety standards compliance



Home wear and tear



Renovations that add value



Hand-picked comparable properties



Different automated valuation models work differently. Some AVMs allow more user inputs than others, and AVM estimates will vary.

Automated valuation models offer many advantages. However, mortgage transactions still require home appraisals. A home appraisal can be an important checkpoint in the mortgage closing process. It helps determine a far more accurate valuation based on the condition of a property.

What Is An AVM’s Purpose In Real Estate?

AVMs are used throughout the real estate industry.

Real estate agents, brokers and mortgage lenders all use AVMs as a starting point to evaluate properties. The technology is commonly used to generate property value estimates on commercial platforms and major consumer websites, including iBuyers.

For example, an iBuyer uses an AVM to estimate a property’s value. Once the iBuyer generates an estimate, a homeowner can place their home for sale on the website. They won’t need to hire a real estate agent or meet potential home buyers.

Where Can I Access An Automated Valuation Model?

You can access automated valuation models on popular real estate websites. But if you want to dive deeper into AVMs, you’ll need access to a leading AVM provider, such as Freddie Mac or Equifax®.

The most efficient way to access estimated property valuations from an automated valuation model is to request it from a real estate professional, a mortgage lender or a financial institution. With their help, you should secure the initial estimate you need.

The Bottom Line: Take Advantage Of Automated Valuation Models

Automated valuation models can paint a reasonably accurate picture of a property’s value – though the results are only as good as the quality of their datasets.

While Rocket Mortgage doesn’t offer an AVM, we offer many free resources to help you explore other ways to determine home value.

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Sarah Sharkey

Sarah Sharkey is a personal finance writer who enjoys diving into the details to help readers make savvy financial decisions. She’s covered mortgages, money management, insurance, budgeting, and more. She lives in Florida with her husband and dog. When she's not writing, she's outside exploring the coast. You can connect with her on LinkedIn.