Choosing a Valuation Tool: CMA vs. AVM

June 27 2012

3837 moneywavgroupWith so many technologies available to real estate agents today, it's easy to feel overwhelmed by the terminology and the options. You can hardly determine which technology to choose, let alone how to use it once you've made your choice. Whenever you have these sorts of questions, your broker and your peers can be great resources. But so can we! That's why we're going to continue our trend of comparing product types and explaining different vendors for each. We started along these lines with our comparison of transaction management vs. document management, and today we'll continue with CMAs and AVMs.

Valuation Tools

CMAs and AVMs are both valuation tools. Let's look at each of them more closely to clearly understand the difference.

  • Competitive Market Analysis (CMA). A CMA is generally used to aid in discussions about the value of an owner's property and the best potential list price. The key here is that the agent prepares the CMA, providing comparable recent sales and their own personal recommendation for listing price. The recommended listing price is based on the comparable homes and the agent's own insights.
  • Automated Value Model (AVM). Already, you may have spotted the key differentiator between a CMA and an AVM – an AVM is automated, meaning that the agent's role in creating the AVM is passive. AVMs rely entirely on mathmatical models to produce an estimate of the value of a home, rather than adding an agent's insights. Many AVMs are available directly to consumers (Zillow's Zestimate is one example of a frequently-used consumer AVM).

Now, there's a lot of variation between the products within each of these categories as well. In order to better understand what they do, we talked to a few of the companies that specialize in this area.

Cloud CMA

Greg Robertson, co-founder of Cloud CMA, explains, "At Cloud CMA, we take a unique approach to the CMA tool. Our belief is that you can have all the data in the world, but if it's not presented in an attractive, easy-to-understand manner, it has limited value to you and your clients.

"The general definition of a CMA is that it combines an agent's insight with reliable data to develop a recommended listing price for a property. But, more than that, we believe that the CMA tool you use should also help you present that information effectively. Cloud CMA reports make it easy for sellers to digest the data being presented to them. Our focus is on usability, so we've perfected every detail – right down to which information is being presented on which page of the report."

Listingbook

Randall Kaplan, CEO of Listingbook, says, "At Listingbook, we believe the best approach that will yield the most valid information for consumers is a comparative market analysis that combines a real estate agent's local market expertise with a technology platform designed to augment and support the agent's findings. On their own, most AVMs are merely ballpark estimates at best and they don't factor in the up-to the-minute analysis of the local agent. For instance, with Listingbook, agents can develop a CMA that is unlike others because: (a) it is developed by the agent; (b) it is electronic, which makes it faster and easier for both the client and agent to review; (c) it is backed by a technology platform that is updated dynamically as statuses of the comps change, and (d) it provides greater details – and ultimately more precise information is what buyers and sellers are looking for. In other words, rather than reviewing a printed document with a customer or logging on to an AVM, Listingbook's online electronic CyberCMA® provides continually updated data with rich additional data content to help their customer better truly get a an understanding of a home's true value."

Real Estate Digital (RED)

John Hensley, Chief Product and Technology Officer for RED, states, "Each AVM is different, and is truly only as good as the data the system has. But, because an AVM is automated, it is limited. For instance, how can a computer grade an ocean view? How can it grade location? A computer can't really quantify the finer points of a neighborhood, but a good agent can truly understand the value of all this. Thus, because they incorporate agent input, a CMA is going to be much more accurate.

"Every MLS system includes a CMA. However, many of these MLS CMAs are super basic. They may be great for a casual user, but some agents and brokers demand a higher-quality product. Our CMA is for power users, those who want to stand out from the rest. This is because we are able to deliver more analytics and complimentary content, plus an appealing professional grade presentation. That presentation matters - after all, a CMA is a marketing tool and is a reflection of you. If you use the CMA in the MLS, your reports are going to look like every other agent's. With rDesk, you can create a customized, more professional look.

"We also went above and beyond with our set of features. For instance, our Marketing Planner allows agents to provide a step-by-step guide for what they will do to sell the property. This is pre-populated but can be customized and ties into the agent's CRM to schedule follow-up. rDesk provides a wealth of complimentary consumer-facing content, materials agents can use to help coach the seller."