What are the SmartZip Home Values, and how are they determined?
The SmartZip Home Values are based on our patented AVM.
What is an automated valuation model (AVM)?
An automated valuation model (AVM) is a service that provides real estate property values based on mathematical modeling.
What are the basic elements assessed in SmartZip’s AVM?
SmartZip estimates home values nationwide using our own automated valuation model (AVM). Our algorithms assess real estate data on various levels—from state, county and city to census tract and neighborhood areas. Each algorithm is slightly different depending on the circumstances, assessing variables related to publicly available property records: transaction history, comparable sales, listing history and monthly rents; as well as area demographics: income, school ratings, crime, lifestyle, population growth, job growth and property attributes: beds, baths, building area and lot size. More importantly, it relies on our neighborhood-level house price index (NHPI).
What is the SmartZip NHPI?
SmartZip’s neighborhood-level house price index (NHPI) measures how much the same homes have sold over time. The hyper-local NHPI currently assesses more than 70,000 neighborhoods across the U.S., including up to 100 million properties. By comparing how the same homes performed under different market conditions, we can more accurately predict a home’s current value in comparison to its last sales price.
Crude example of the NHPI: A home on a cul de sac in Richmond sold for $300,000 in 2008 but prices of similar homes on that cul de sac have (on average), risen 20% since then. The NHPI would show that the home may currently be worth $360,000—20% more than its 2008 sales price. (Note: The NHPI is only one factor taken into account when calculating an AVM value.)
How does SmartZip calculate AVMs in non-disclosure areas?
Most real estate transaction information in the U.S. is public record. However, some counties and states allow home buyers to keep the sale value of their home transaction confidential. In these non-disclosure counties and states, we may still receive mortgage data and transaction prices from buyers who choose to make it public record. We use this as the basis for each home sale price estimate.
Next—and this is something no one else does—when non-disclosure areas are being analyzed, our NHPI and AVM can adapt to “borrow” data from properties that match the geographical area and/or property features of the home being evaluated. We also compare against local listing prices and local sold prices (that have been reported) in order to finalize our AVM values.
Example: The HPI is a repeat sales index. So, what happens if we only have one sale? Borrow from other properties with similar qualities, in similar areas.
How good is SmartZip’s AVM?
We follow a very rigorous process to ensure that our AVMs are of the highest quality possible. One important thing to remember is that a home is only as valuable as what people are willing to pay for it. For that reason, we measure the accuracy of our AVMs by benchmarking them against actual sales prices, not listing prices. From there, we give each AVM a confidence score.
The majority of markets have a score above 80. The markets with low AVM confidence are generally those without much historical data, such as nondisclosure counties or states.
