Wondering what’s up at Teranet?
This article "Major growth insight for Toronto-based Teranet" will
give you some great insight. In the article, Teranet President, Value Added Commercial
Solutions, Lawrence Franco discusses some of
the latest and greatest innovations at Teranet Enterprises Inc.
Tuesday 29 July 2014
Monday 28 July 2014
What is an AVM or Automated Valuation Model?
Despite the fact that so many lenders now use them, one very
common question is what is an AVM or automated valuation model?
An automated valuation model is an algorithm that analyses
data and generates an estimated value on a particular property.
This value is derived from specific attributes of a property
as well as actual sales information, all of which is stored in a large
database. Some AVMs derive their information from 3rd party
databases such as the Province of Ontario Land Registry System, Google and
other sources. The sources of the data will determine how accurate the AVM is.
An AVM will generally compare a subject property to the property attributes and
sales data within the database or 3rd party databases and produce an
estimated value.
Many lenders are now using AVMs at the initial stages of the
underwriting process because they represent substantial time savings and are
very convenient - an AVM can be generated instantly online.
Lenders and insurers are incorporating AVMs into many facets
of their organizations too. Here are some other examples of how lenders are
using AVMs:
·
Pre funding
o To
validate property values
o To
perform fraud checks and mitigate fraud
·
Post funding
o To
evaluate their lending portfolios
o In
the event of a default, to determine a sales price
o To
identify upsell opportunities
·
Lenders
o Approval
of high ratio mortgages
An AVM is not an appraisal. The question ‘what is an
automated valuation model’ often comes up because they can sometimes be
confused with an appraisal. In fact, an AVM does not replace an appraisal –
they work hand-in-hand. Leveraging AVMs will reduce the number of appraisals
you need because you will be able to identify deals that are worth far less
than what’s stated on the application before you get to the stage of ordering
an appraisal.
If you are considering adding the capability for your
underwriters to be able to generate AVMs, it is important to evaluate vendors
carefully. Where the data comes from and the accuracy of the information will
play a huge role in how accurate your AVMs are. Furthermore, many AVM providers
provide applications that include AVM as well as a host of other underwriting
tools, information and data.
For more information about automated valuation models please
visit www.purview.ca/lenders
or call 1-855-787-8439.
Monday 21 July 2014
Accessing Sales History Data Really Gives You the Goods!
Real estate sales professionals: your underwriters either
serve your branches or your agents/brokers. They submit applications to you and
they want their deals turned around quickly. The borrower may have great credit
and income and ‘as a borrower’ perhaps qualifies for the financing, or the borrower
could be self-employed or not have great credit history – in either case, the
next step is to assess the security (the property).
This can be particularly challenging in neighbourhoods in
urban centres like Toronto where the real estate market has continued to climb
even through turbulence in the economy, or other major city centres in
provinces like Alberta where property values have been up and down.
It can be hard to know what a property is actually worth; in
some areas, what a person paid for a home 5 years ago could be fairly similar
to its current value. In other areas, the value could have increased by up to
30-40%.
Before even getting to this stage or generating an automated
property valuation, submitting the deal to the insurer or ordering an
appraisal, there are measures lenders can take to get a sense of the current
market value of the properties they are considering financing.
One measure is reviewing sales history information.
·
Reviewing sales history information on the
subject property enables you to validate when the property was purchased and
the purchase price. If the property was purchased recently this can highlight
how wide the gap is between what the homeowner paid for the house and what they
think it is worth now.
·
Reviewing sales history information on other
comparable properties in the neighbourhood will reveal what comparable
properties in the area are selling for.
Now, if it happened that when looking at the sales history
information a property was purchased within the past 5 years and there is a
substantial gap between the purchase price and what the stated value is now,
comparable sales in the area may explain this as the property could be located
in an area with a hot real estate market.
If both the sales history information and comparable sales
history information draw the same conclusion and it seems that the property is
worth much less, there may no longer be a deal and the lender can save the time
generating an automated property valuation, submitting the deal to the insurer,
ordering an appraisal, etc. In addition, if the application was referred by a
broker/partner they can let them know that the value is not there and give them
the option to order an appraisal. This strengthens these relationships.
Ensuring that your underwriting team has access to accurate
sales history data makes it easier for them to make more effective underwriting
decisions and be more efficient.
For more information about how to access sales history data
on a particular property or properties in a particular area please visit www.purview.ca/lender or call
1-855-787-8439.
Monday 14 July 2014
Mitigate Time Wasted with Automated Property Valuation (Automated Valuation Model/AVM)
More and more lenders are incorporating an automated
valuation model (AVM) into their underwriting processes. Using an automated
valuation model, you can generate property valuations - saving an immense
amount of time not only for you but also for your partners and suppliers.
Different lenders finance deals based on different criteria.
If you are a major financial institution like a bank, credit union, trust or
finance company, your mortgages are likely high ratio mortgages covered by one
of the mortgage insurers. This means that outside of your approval criteria you
must meet the lending criteria of the insurer. If you are a private lender,
operate a mortgage investment corporation or perhaps you are a major financial
institution and want to look at financing riskier deals – a large part of your
approval criteria is going to come down to the equity/security in the property.
What is true for all lenders is that if a property is the
security on the loan, the value of the property/security will have to be
determined.
This is where an automated property valuation comes in.
Sometimes it can get confusing figuring out which tool to use when assessing
the value of a property. Generally the tool you use will depend on the type of
deal you are working on.
Insured Deals
More and more lenders are now taking their own steps to
order drive-by appraisals, do their own research on properties, generate their
own automated property valuation, etc. in an effort to further identify problem
deals or deals where fraud is prevalent.
Uninsured Deals
When a deal is uninsured, generally speaking the lender will
put almost all of their faith in the property appraisal when it comes to the
property value that they use when making a lending decision. Sometimes the
lender pays for the appraisal, but more often than not the borrower or
sometimes the mortgage broker/agent pays. The cost and time associated with
underwriting a deal, ordering and then waiting for an appraisal only to find
out that the value of a property is less than anticipated is disappointing and
is a major cause of deals that end up having to be canceled.
So it really is a case of either or - either your deal is
insured, or it is not and you require an appraisal. What is true for both
scenarios is that with some extra research at the front end you can get an idea
of what a property is worth and avoid the time spent underwriting and then
sending the deal out to various 3rd parties to complete the mortgage
financing process.
You can achieve this using an automated property valuation.
An AVM can be of use on a deal whether it is insured or requires an appraisal.
You see, leveraging an AVM can help you determine if a property value is
accurate at the application stage. If it is not – you don’t waste any more
time. If it is, you are good to go. If it is greater, you are in a position to
upsell the client.
For more information about an automated property valuation
or automated valuation model please visit www.puview.ca/lenders
or call 1-855-787-8439.
Wednesday 9 July 2014
Scheduled Maintenance for Purview
Please be advised that Purview will be unavailable on Friday July 11th at 8:00pm EST until Saturday July 12th at 1:00am EST for scheduled maintenance. Please ensure you run any critical Purview reports in advance of this maintenance shut down.
We apologize for any inconvenience this may cause.
Monday 7 July 2014
4 Pics – Guess the Words
We thought we would have some fun and share a game – here
are 4 pictures, can you guess the words?
__ __ __ __ __ __ __ __ __ __ __ __ __
Hints: the answer is 2 words!
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