AVM stands for Automated Valuation Model. An AVM is a pricing algorithm (computer program) used by acquisitions departments at real estate investment firms and iBuyers including Opendoor, Offerpad, Zillow Offers and RedfinNow to determine how much to offer for a given single family home.
AVMs are proprietary in nature, meaning they are unique to each iBuyer (think secret sauce). AVMs factor in sales data, economic data, demographic data, renovation and ARV assumptions in order to provide an attractive cash offer to sellers.
If an AVM is not accurate, it can result in significant losses for the iBuyer -- this is likely the reason why Zillow paused their iBuying service in Q4 2021. For this reason, it is prudent to apply a layer of disciplined human analysis to refine and train AVM output.