Automated Valuation Model (AVM)

An automated valuation model is a computer estimate of what a home is worth, built from tax records, recent sales and listings with no one visiting the property. Online home value estimates are AVMs. BRRRR investors use them to screen deals, but they cannot see a renovation, so they miss both a distressed discount and the after-repair value.

An AVM assumes a typical house in typical condition. For the property as bought, the estimate is often too high; for the finished rehab, too low until new sales enter the data. Neither number is a substitute for comparable sales of renovated homes pulled by an agent or appraiser.

Some lenders use AVMs for smaller loans or to review an appraisal, which makes them worth checking before a refinance. If the automated figure sits far below the expected value, the file may get extra scrutiny.

Further reading: Automated Valuation Model (AVM) on Wikipedia.