Is an AVM an online property appraisal?
In a short answer, no.
For the long answer, read on!
While AVMs (automated valuation models) are incredibly useful in the mortgage application process, they are not the same thing as a full property appraisal. Here is why.
AVMs are unbiased estimated property valuations generated by a computer-based mathematical equation that takes several factors into account. These factors include the property’s location, market conditions, public record data, and the real estate characteristics at a specified date.
They can also be accessed online, from the comfort of your computer. Depending on the provider, they are typically generated with up-to-date, real-time property information and you receive your valuation instantly.
What an AVM does not take into account, however, are the external and internal conditions of the property.
In comparing AVMs and property appraisals, an AVM would be closer to the online equivalent of a drive-by appraisal. Some AVMs even include street view imagery of the property.
If you require a full property appraisal, though, an AVM is very different — which is why it is not quite accurate to say that an AVM is an online property appraisal.
Many professionals find it beneficial to use both an AVM and a full property appraisal at different stages of the mortgage application process, or for different purposes.
AVMs are extremely useful for:
- When the loan-to-value ratio is not high.
- To support most home equity loans.
- During the pre-approval stage to determine the viability of the mortgage application at the time the loan is processed.
- During the collateral adjudication stage to assess collateral risk.
- Post-funding, to provide an assessment of the overall portfolio.
While an AVM does not replace a full property appraisal, they can work hand-in-hand. For instance, with an AVM you can quickly verify basics such as potential financing challenges, the estimated property value, property ownership, and the number of people on title.
As the deal proceeds, you can later call in an appraisal to confirm the AVM details, further investigate any flags, and raise any issues on the condition of the property that an AVM cannot perform.
The key to working with either an AVM or a property appraisal (or both!) is the quality of your source. With an appraisal, you want to make sure the appraiser is trained, trusted, adheres to federal and/or provincial standards, and is a member in good standing with a professional organization, like the Appraisal Institute of Canada.
The source of your AVM is equally important. The data included should be accurate, up-to-date, and complete. You also want to verify what type of AVM model you are accessing to be certain you are getting the most accurate estimate possible.
An AVM from Purview is trustworthy, accurate, and comes with added features in your Purview Report. Learn more today. Call 1-855-787-8439 or visit www.purview.ca.
Purview is just one of Teranet’s Financial Services Solutions; stay tuned for our upcoming portfolio unveiling!