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We hear it often enough, but is the question of an appraisal vs automated valuation model really a question of either or? This blog will explore this very question. First, let’s take a look at the differences between an appraisal and an automated valuation model (AVM).

An appraisal is completed by a human – a licensed appraiser. As you know, in an appraisal, an appraiser visits the property and inspects it to ensure that its characteristics are consistent with what was stated on the application. They will also look at the interior and exterior condition, and sales of comparable properties in close proximity to the property in question. The appraiser will evaluate the property based on the criteria you provide – e.g. comparables that were on the market for a specified time before they sold or within a specified proximity.

An automated valuation model or AVM does not involve a human inspection of the property. It is an automated program that estimates a property’s value based on an analysis of property characteristics against public record data. An AVM does not review interior and exterior property conditions, though some will include street view imagery, which may raise some of the same flags that could have been raised on a drive-by appraisal.

AVMs are conventionally less expensive than traditional appraisals, and much faster to obtain since they are available at the click of a mouse. Appraisals are based on the knowledge and opinions of an appraiser and are thereby subjective, whereas AVMs are objective and are not impacted by a human’s opinion of a property.

While AVMs are convenient, they do not replace the need for an appraisal. It is not a question of either or, because in fact appraisals and AVMs work hand in hand.
AVMs are most beneficial when used at the application stage. If an AVM is requested and there is a large discrepancy in the stated value of the property, then it may not make sense to order an appraisal and proceed with the deal at all. In cases where the AVM is consistent with the stated value in the application, it supports moving forward with the appraisal. In cases where the AVM is substantially higher than the stated value, this presents a valuable opportunity for you to advise the broker or loan officer who submitted the deal that there may be an upsell opportunity.
Leveraging the use of both AVMs and appraisals in your underwriting operation makes you only that much more agile and competitive.
The Purview automated valuation model is based on up to date, accurate land registry data – you can be sure it will be a great support tool whether paired with an appraisal or not.

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