Using Statistics to Estimate Your Home's Value

Example ImageIn the best of all worlds, your home or commerical property could be valued quickly, accurately and without the need for a physical inspection.  For some lending or financial planning needs, a valuation within say 10% high or low of the theoretical "most probable selling price" would be sufficient to secure a loan or make an asset managment decision such as gifting or the transfer of a property into a family trust.

The traditional full appraisal which typically requires an inspection of the property and the development of a Market Analysis based on the most similar sales that have occurred recently will probably always be required for high Loan to Value (LTV) lending or with unusual properties. An alternative method that has become practical recently is through the use of Automated Valuation Models or AVMs.  AVM's use the behavior of larger groups of sales to generalize and eventually predict a most likely sale price, based on the data that can be provided to the model on the particular property being valued.  The larger number of sales (i.e the sample) that exist, the greater accuracy that can be achieved in predicting the sale price for a particular house being modeled.   Our lives are now filled with "inferences" we derive statistically; from tomorrow's weather to who would be most likely to be elected president if the election were held today.  These same statistical methods can be used to predict the behavior of buyers and sellers to greater and lesser degrees as they negotiate the ultimate sale price.

A regression equation, which is the mathematical formula that predicts the sale price, is a set of building blocks of value that could be paraphrased, for example, as "the building size x $78.52 plus the lot size x $2.25 plus the number of garage stalls x $1,212" and so on.  This process is continued until the prediction becomes close enough to the theoretical true selling price that no other charactertics are relavent or can produce a closer estimate.  Our firm has devoted a large amount of time this year in developing the right building blocks to produce generally reliable estimates of what your property would bring.  We are beginning this new service with detached single family dwellings only, but anticipate expanding into other property classes if we can.  We have used some of these methods "on the fly" to make individual adjustment for conventional appraisals and now have completed full value estimates on most residences within the Madison city limits.

The following is a summary of what we will provide in this initial service:

AVM Features Summary

If you are interested in having us provide an AVM estimate on a property, our initial fee will be $20 that will be waived for the first 25 clients if you will fill out a response sheet and give us your suggestions on how to make it better (alright, besides coming up with a higher number!)  Eventually, this service will be fully automated (we're building that web page now) but for the first few weeks or months, we will ask that you use our email send us your street address or parcel number and we will mail or email you back the results.   If you would rather not respond as part of our first 25, we will simply send you a bill in the mail.  If you wish to be billed to a location different from the property being valued, please include that information with your request as well.

Please read the information on the data sources, methods, disclaimers and other factors provided on the About Our AVM's page.

We hope this new way to utilize appraiser's knowledge and experience will make the processes of lending and asset managment more efficient and convenient.  We appreciate your visit to our site and hope you will find this new service of use to you and your financial professionals.

United Real Estate Corp/ /AVM's
Real Estate Apprasiers and Consultants, Madison, Wisconsin