This is an interesting topic
because some confuse the different ways that AVMs are relied upon in real
estate transactions. Many lenders use AVMs with other methods of assessing a
property value, such as an appraisal. AVM is the acronym for Automated
Valuation Model, which is computer generated and produces an estimate of a
property value based on analysis of public record data, property location,
market conditions and real estate characteristics at a specific point in time.
Automated Valuations may be based on a single model or a combination of
multiple models.
Some of the most popular models
involved:
·
The House Price Index
Model – leverages house price indices (sales in a specific geographic location)
to establish a value.
·
Tax Assessed Value
(TAV) models – leverages tax assessed valuations to estimate value.
·
Hedonic models –
leverages regression techniques to estimate value.
Simply stated, when a lender uses
an AVM tool like Purview to generate an AVM, the application will instantly
generate an estimate of the value. It will provide information such as who the
current homeowner is, recent sales history, information on the property,
indicative market value, comparable sales of similar properties, check the
application for attributes consistent with fraud and more…
An AVM may be able to identify
large discrepancies in value which can enable you, the lender, to go back to
your client, agent/broker to probe for more information about the deal/value.
This saves you and your partners greatly in the administration of deals that
are not likely to close because of undisclosed or misstated information.
So what about the question “true
or false: lenders no longer require an appraisal when an AVM is available?” In
the end, it will always come down to the lending policy of each
organization. While some lenders will
choose to proceed after generating an AVM and without an appraisal, in many
cases we see lenders taking advantage of all measures available to them, both
AVM and appraisal to make sure they have a firm idea of what their security is
worth.
For more about the benefits of
using both and AVM and an appraisal in your due diligence, please contact
Purview For Lenders today by calling 1.855.787.8439.
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