Understanding AVM Accuracy: The Importance of Prelist Benchmarks

As Automated Valuation Models (AVMs) become increasingly vital in the real estate world, especially for SFR investors and mortgage lenders, one critical question remains: How accurate are these models, really? AVMs are praised for their speed and data-driven insights, but ensuring they truly reflect market value is crucial. To gauge their accuracy, it’s important to look at how AVM estimates stack up against actual sale prices—using prelist and postlist benchmarks.

Postlist benchmarks: Typically, AVMs are evaluated by comparing their estimates to the final sale prices of properties after they’ve been sold. While this method provides some insight, it has a notable downside: AVMs might already be influenced by the list price, which often aligns closely with the eventual sale price. This can give a misleading impression of the AVM’s accuracy.

Prelist benchmarks: This is where prelist benchmarks come into play. These are AVM estimates made before the property hits the market, meaning they aren’t swayed by the list price. This gives a more genuine measure of an AVM’s ability to predict market value, particularly for off-market properties—those that aren’t yet up for sale, which make up the majority of housing stock at any given time.

For SFR investors and lenders, understanding the difference between these benchmarks is crucial. Prelist benchmarks, in particular, provide a clearer, more reliable picture of how well an AVM can assess true market value. They push the models to consider a wider range of data points, beyond just the list price.

Why this matters: At HouseCanary, we emphasize prelist benchmarks because they strip away biases that can overinflate AVM accuracy. By doing so, these benchmarks ensure that the models offer a more accurate reflection of market value—something that’s especially important when dealing with off-market properties where no list price exists to guide the AVM.

In the competitive SFR market, having access to accurate, unbiased AVM data can make a significant difference in decision-making. Prelist benchmarks are a step toward more reliable property valuations, helping investors and lenders navigate the market with greater confidence.

Want to learn more? For a deeper dive into the role of prelist benchmarks in AVM accuracy and how this approach can benefit your investment strategy, check out our full article on the blog.