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How Accurate Are Automated Valuation Models Compared With Appraisals?

Explore the accuracy of Automated Valuation Models compared to traditional appraisals. Learn their pros, cons, and impact on property pricing for buyers, sellers, and real estate professionals.

flareAI Services

21 Sep 2025 — 6 min read

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Accurate property valuation isn't just about assigning a dollar figure it's the bedrock of trust in real estate. Whether you're selling a bungalow in Holland, Michigan, or buying a condo in Florida, a precise valuation ensures fairness, informs strategy, and prevents costly missteps. The National Association of Realtors (NAR) settlement, finalized in 2024, has upended traditional commission structures, making buyers and sellers more cost-conscious. As Realtor.com notes, these changes have sparked new scrutiny over every expense, including how properties are valued. Platforms like Sidedoor, operating in high-demand regions like Michigan and Florida, empower clients to select tailored services, making the choice between AVMs and appraisals a pivotal decision.

AVMs and appraisals represent two distinct approaches. One leverages technology for speed and scale; the other relies on human expertise for depth. Understanding their strengths and limitations is essential for navigating the post-NAR landscape.

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Decoding AVMs and Appraisals

AVMs are the tech-driven powerhouses of valuation. They use mathematical models to estimate a property's value at a specific moment, drawing from Multiple Listing Services (MLS), public records, and market trends, as described in a verified source. These models, often based on comparable sales or hedonic pricing, mimic an appraiser's sales comparison approach but operate at lightning speed. Their appeal lies in their efficiency results are instant, costs are minimal, and accessibility is unmatched, making them ideal for quick estimates in fast-moving markets like West Michigan.

Appraisals, by contrast, are the gold standard for precision. A licensed appraiser conducts an on-site inspection, assessing a property's condition, upgrades, and local market nuances. As a reliable source explains, appraisals determine a property's market value the price a willing buyer and seller would agree on in an open, competitive market. Required for most mortgage loans, appraisals ensure fairness in transactions, from home sales to estate settlements. However, they come with a higher price tag, often $300 to $600, and can take days to complete.

The NAR settlement has amplified the stakes. With commissions now negotiable, as highlighted by US News, buyers and sellers are rethinking which services justify their cost. An AVM might suffice for a preliminary price check, but an appraisal could be the deciding factor in a high-stakes negotiation.

Emerging Trends in Valuation

AVMs are surging in popularity, embraced by lenders, title companies, and real estate platforms like West Edge Realty and Real Estate One. Their speed makes them indispensable in markets like Florida, where seasonal demand drives rapid turnover. Hybrid models, combining AVM's efficiency with human oversight, are also gaining ground, offering a balance of speed and accuracy. These trends align with Sidedoor's mission to provide flexible, a la carte services, allowing agents to meet client's specific needs rather than pushing full-service packages.

In volatile regions like West Michigan, where lakefront properties can see sudden price spikes, AVMs help agents set competitive listing prices. Title companies and lenders, such as Lake Michigan Credit Union, use AVMs for refinancing decisions, streamlining processes before ordering full appraisals. This shift reflects a broader move toward transparency and efficiency, core to Sidedoor's value proposition.

Real-World Applications

Consider a seller in Holland, Michigan, preparing to list a lakeside cottage. Using an AVM through a Sidedoor partner like Premier Lakeshore, they receive an estimate of $425,000 based on recent sales data. The number is a strong starting point, but an appraiser later visits, noting a newly renovated kitchen and a private dock, adjusting the value to $460,000. The AVM provided speed; the appraisal added precision, ensuring the seller maximizes their return.

Lenders are also leaning on AVMs. Banks in Sidedoor's network use them to assess properties for refinancing, saving time before committing to a full appraisal. Buyers, meanwhile, use AVMs to screen listings, narrowing their options before investing in a costly appraisal. These tools empower consumers to make informed decisions early, a key advantage in competitive markets.

Yet challenges persist. AVMs struggle with unique properties like a historic Michigan farmhouse with no recent comparables or in rural areas where data is sparse. They also miss on-site factors, like outdated plumbing or a stunning view. Appraisals, while thorough, aren't flawless. Their cost can deter budget-conscious sellers, and inconsistencies between appraisers can lead to disputes. In a post-NAR world, where every dollar counts, choosing the right tool is critical.

Navigating Challenges and Myths

The NAR settlement has fueled misconceptions, such as the belief that agent services are now “free” or commissions are universally lower. As Yahoo Finance reports, the reality is more nuanced commissions are negotiable, but valuation costs remain a necessary expense. AVMs, while cost-effective, can mislead if users overestimate their accuracy. A seller relying solely on an inflated AVM estimate might list too high, deterring buyers. Appraisals, though more reliable, can feel excessive for straightforward transactions, leaving clients frustrated by the expense.

Sidedoor counters these challenges by offering flexibility. Agents can use AVMs to attract clients with quick estimates, then pivot to appraisals for complex deals. This approach, promoted on platforms like Facebook and Instagram, builds trust by aligning services with client needs, addressing objections about Sidedoor's startup status or less-polished website.

Opportunities for Strategic Advantage

AVMs offer a cost-effective entry point for sellers aiming to maximize proceeds. In Florida's condo market, an AVM can help gauge seasonal trends before listing. Appraisals, meanwhile, shine in high-value transactions, providing credibility that strengthens negotiations. Sidedoor's platform connects professionals like Chicago Title's Holland office to deliver tailored solutions, ensuring clients use the right tool at the right time.

Integration is the future. By embedding AVM data into transaction platforms, Sidedoor streamlines pricing and documentation, helping agents secure deals they might otherwise miss. This aligns with Sidedoor's unique differentiator: empowering professionals to offer targeted services, not just full-service packages, in competitive markets.

The Road Ahead

The valuation landscape is evolving. Experts foresee wider adoption of hybrid models, blending AVM speed with appraisal accuracy. Regulatory oversight is also increasing, with demands for fairer AVM algorithms. For now, the strategy is clear: use AVMs for initial estimates, then confirm with appraisals for final pricing. Educating clients on when each tool applies AVMs for early strategy, appraisals for binding decisions will be key, especially in dynamic markets like Michigan and Florida.

Valuation as a Strategic Tool

In the post-NAR era, real estate demands smarter choices. AVMs deliver speed and affordability, while appraisals offer unmatched precision. Together, they empower buyers, sellers, and professionals to navigate a shifting market with confidence. Whether you're listing a Michigan lakefront home or eyeing a Florida condo, platforms like Sidedoor simplify the process, connecting you with tools and experts to get it right. The next step? Consult a professional to choose the valuation method that fits your deal, turning numbers into a winning strategy. This post may contain affiliate links to services we recommend.

Frequently Asked Questions

What is the main difference between an AVM and a traditional appraisal?

AVMs (Automated Valuation Models) use mathematical algorithms to instantly estimate property values based on data from MLS, public records, and market trends, while traditional appraisals involve a licensed professional conducting an on-site inspection to assess the property's condition, upgrades, and local market factors. AVMs offer speed and low cost but may miss unique property features, whereas appraisals provide greater accuracy and are required for most mortgage loans, though they cost $300-600 and take several days to complete.

When should I use an AVM versus ordering a full appraisal for my property?

Use AVMs for preliminary price estimates, screening potential listings, or quick market assessments in fast-moving markets like Florida's seasonal real estate cycles. Order a full appraisal for high-stakes transactions, mortgage applications, unique properties (like historic homes with no recent comparables), or when precise valuation is critical for negotiations. Many professionals recommend using AVMs for initial strategy and confirming with appraisals for final pricing decisions, especially in today's post-NAR settlement environment where every cost matters.

How has the NAR settlement affected property valuation choices in real estate?

The NAR settlement has made buyers and sellers more cost-conscious about every transaction expense, including valuation methods. With real estate commissions now negotiable rather than standardized, clients are scrutinizing which services justify their costs, leading to increased demand for flexible valuation options. This has driven platforms like Sidedoor to offer à la carte services, allowing agents to match valuation methods (AVMs for speed, appraisals for precision) to specific client needs rather than pushing full-service packages.

Disclaimer: The above helpful resources content contains personal opinions and experiences. The information provided is for general knowledge and does not constitute professional advice.

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