AVMs (Automated Valuation Models) often undervalue unique or renovated homes because they rely on public records and comparable sales, missing custom features and recent upgrades. Since AVMs don’t account for home upgrades like remodeled kitchens or finished basements unless officially recorded, their estimates can be significantly off. For more accurate pricing, buyers and sellers should consider professional appraisals or market analyses that factor in renovations and distinctive property traits.
This blog breaks down:
- Why AVMs struggle with unique and renovated properties
- How that impacts buyers, sellers, and lenders
- What you can do to get a more accurate home valuation
What Is an AVM and How Does It Work?
An Automated Valuation Model (AVM) is a computer algorithm that uses available data—like recent sales, tax records, and home specs—to estimate a property’s market value.
What Data Does an AVM Use?
- Sale prices of nearby homes (comps)
- Property size and lot information
- Number of bedrooms and bathrooms
- Tax assessments
- Location and school district
Who Uses AVMs?
- Lenders (for mortgage pre-approvals and underwriting)
- Real estate websites (to give home estimates)
- Investors and iBuyers (for portfolio or bulk decisions)
Fast, data-driven, and free
But not personalized or detail-oriented
Why AVMs Struggle with Unique or Renovated Properties
1. No Comparable Sales Exist Nearby
AVMs need similar homes nearby to estimate value. But what if your home is:
- A custom-built design
- Architecturally unique (Tudor, A-frame, etc.)
- The only one with a pool, view, or ADU?
AVMs may use the next closest home—which might be outdated or less desirable—and undervalue yours by thousands.
Example:
You own a hilltop home with skyline views and custom landscaping. Nearby sales are all standard ranch homes. The AVM might value your home at $500,000, while a real agent would list it at $575,000–$600,000 based on true market appeal.
2. Renovations Aren’t Always Counted
Most AVMs only see public records. So unless your upgrades were permitted and logged:
- That chef’s kitchen?
- Finished basement?
- New windows and roof?
They might be completely invisible to the AVM.
The Risk:
You spent $80K on upgrades. AVM still thinks your house is in 2015 condition.
3. They Don’t Understand Luxury Features
Even if your features are recorded, AVMs may not weigh them correctly:
- Home gym, sauna, or wine cellar?
- Smart-home automation or EV charger?
- Panoramic views?
Humans know these boost appeal and value. Algorithms? Not so much.
4. Data Lag and Incompleteness
AVMs can only analyze the data they have. If:
- Local sales haven’t closed or updated
- Your upgrades aren’t yet reflected in county records
- Your neighborhood is rapidly changing
AVMs vs. Human Appraisals: Key Differences
Feature |
AVM |
Appraisal |
| Speed | ✅ Instant | ❌ 3–7 Days |
| Cost | ✅ Free/Low-Cost | ❌ $400–$600 |
| Sees Interior Upgrades | ❌ No | ✅ Yes |
| Weighs Unique Features | ❌ Limited | ✅ Expert-adjusted |
| Required by Lenders | 🔁 Sometimes (pre-approval) | ✅ Yes (final loan approval) |
Who Is Most Affected by AVM Inaccuracy?
Sellers
- May list too low (lose money) or too high (fewer offers)
- AVMs ignore customizations, causing undervaluation
Buyers
- May assume a listing is overpriced when it’s just undervalued by AVM
- Could miss out on bidding due to bad online estimates
Lenders
- Use AVMs for desktop underwriting or pre-approvals
- If the AVM is low, may ask for a full appraisal or higher down payment
How to Get an Accurate Valuation for Unique or Renovated Homes
Here’s how to avoid AVM pitfalls and get pricing you can trust:
1. Get a Professional Appraisal
Especially during refinance, sale, or post-renovation. Appraisers evaluate condition, upgrades, and market trends.
2. Request a CMA (Comparative Market Analysis)
Agents familiar with your area can prepare a custom pricing analysis using the most relevant and recent sales—even beyond your ZIP code.
3. Document Your Upgrades
- Keep receipts, plans, permits, and photos
- Share with appraisers, agents, or buyers to highlight added value
4. Use Multiple AVMs
Compare Zillow, Redfin, and lender AVMs to get a broader picture. Even if values differ, the range can give clues.
5. Update Public Records
After significant upgrades, notify your county or city so tax records reflect improvements. It helps with future valuations and resale.
Try: Home Valuation Calculator or Talk to an Expert
FAQs
Can an AVM be used instead of an appraisal?
Sometimes—for pre-approvals or refinancing. But most lenders require a full appraisal for final loan approval.
Do AVMs update after renovations?
Only if public records are updated or the algorithm incorporates new listing data—which can take months or may never happen.
Is there a way to appeal a low AVM?
You can submit a Reconsideration of Value (ROV) to your lender with supporting documents or order a new appraisal.
Are AVMs ever accurate?
Yes—for tract homes in uniform neighborhoods with lots of recent sales. But even then, they should be used as estimates, not absolutes.
Conclusion
AVMs are powerful for what they are—fast, digital estimates. But when you’re dealing with a renovated, custom, or premium property, they can mislead more than they inform.
Don’t let an algorithm decide your property’s worth.
Whether you’re buying, selling, or refinancing, make sure to:
- Verify with professionals
- Document your upgrades
- Question AVMs when they don’t align with market reality