There are many different real estate tools that lenders
leverage when underwriting deals. If you operate an underwriting department of
a bank, mortgage insurer, credit union, trust company, finance company, mortgage
investment corp., etc., then you know that a large part of the underwriting
process deals with validating the value of a property.
Whether your deals are high ratio insured so you count on
your insurer to agree with the value of the properties, or you require an
appraisal to validate value, the properties being financed are your security
and so value must be verified one way or another.
So what tools do your lenders and insurers leverage to
validate home value and at what stage in the underwriting process should
property value be verified?
1.
Insured
Deals - If the deal is insured the insurer will run the property through
their automated property valuation tool to validate property value. In the case of CMHC, they will use Emili
which will agree or disagree with the values stated in your underwriter’s
applications.
·
What happens if the property doesn’t come in on
value? The underwriter’s time is wasted putting the deal together for the
insurer as well as the time of the insurer’s underwriter.
2.
Appraisals
- If you require an appraisal on the deal you may request a drive-by appraisal
or a full appraisal.
·
If the drive-by appraisal doesn’t come in on
value, this could result in expense to you in both time and dispersement.
·
If the full appraisal doesn’t come in on value,
this results in expense to the client and the expense of your underwriter’s
time.
3.
Automated
Valuation Model (AVM) – Because the above two real estate appraisal tools
used to estimate value result in time and expense if the property doesn’t come
in on value, many lenders and insurers are now incorporating AVMs into the
underwriting process. AVMs are different from appraisals because the value is
generated by a computer program that produces an estimate of a property’s value
based on an analysis of a wide range of data. When an AVM is generated, like an
appraisal, comparable sales will be available to you.
If an AVM is performed before you
proceed to submit deals to insurers or appraisers, underwriters can determine
if the value is there or not. This saves your underwriter’s time, the insurer’s
time and where an appraisal is involved, expense to the client.
Often lenders will have both a property valuation in their
files generated through AVM, plus an appraisal or confirmation of value from
the insurer.
For more information about real estate appraisal tools that
include AVM please visit www.purview.ca/lenders
or call 1-855-787-3439.
