Automated Valuation Model (AVM)

An automated valuation model is software that estimates a property's value from public records, recent sales and property characteristics, without an appraiser visiting. Online home value estimates are AVMs. Some also estimate rent, which makes it tempting to build a gross rent multiplier from two machine estimates.

An AVM value divided by an AVM rent estimate is a GRM with two sources of error instead of one. Both models lean on nearby sales and listings, so they tend to miss the same things: a gut renovation, a bad floor plan, a lease that is well below market. The resulting multiplier can look precise while resting on guesses.

AVMs are useful for sorting a long list quickly, which is also what GRM is for. Treat the pair as a first pass. For any property that makes the short list, replace the AVM rent with rent from actual comparable listings and the AVM value with the asking price or recent comparable sales.

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