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 3^rd 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.