As I mentioned yesterday (below), pricing is the most important factor in the successful sale of property.  Absorption rates are generally indicative of a general market climate.  However, more than that is necessary to arrive at a market value.  Automatic Value Models (AVMs) are attractive to many people.  A recent introduction, Zillow, is the latest of this phenomenon.  They claim to get within 10% of value of 62% of the homes they have in their database.  So, if your home has a value of $500,000, you have a 62% chance of losing only $50,000, or pricing it $50,000 over the market.  Not an attractive proposition.

The flaw in AVMs is that they are often based on tax assessments of surrounding properties.  Occasionally, AVMs have access to Realtors® multiple listing systems.  But, without seeing the interior of a property, it is difficult for a statistics-based system to come up with an accurate price.  Moreover, without seeing the so-called comparable sales, it is virtually impossible to arrive at a value of validity. 

Nor do AVMs take into consideration the dynamics of the marketplace.  If interest rates soar, it could be months (or longer) before an AVM reflects the impact on prices.  If a major local employer expands its workforce, it could be months (or longer) before the AVM reflects the change.

So whats the answer?  Ill tell you – soon.