Often times, when brokers and agents think about automated
valuation, some think, “Why do I need that? My deals are either insured and if
they’re not we look to a property appraisal to validate value.” This is issue
number 1 – an automated valuation is not an appraisal.
Automated valuations are a tool that lenders and insurers
have started using in recent years. You see, when you submit a deal to a lender
and your deal doesn’t close because of an issue concerning value, this creates
significant expense to the lender. Some lenders even have policies that require
you to have a certain percentage of your mortgage applications close.
An automated valuation is generated through an automated
valuation model or AVM which is essentially a computer program or algorithm
that crunches data and produces an estimated value for a property. Some of this
data includes the property’s sales history and comparable sales in the
neighbourhood. Many lenders and insurers will run an automated valuation on an
application to ensure that the value is accurate and reflects what is stated on
your application.
If it turns out that the AVM came in on value and all other
attributes on the mortgage application are acceptable, the lender will issue an
approval and proceed to submit the deal to the insurer or advise you to order
an appraisal.
It is clear that lenders and insurers are using them, as
well as why. Well mortgage brokers and agents have started using them too! Why?
For many of the same reasons lenders use them. If at the point that you take an
application you request an automated valuation of the property you could: 1)
learn that the value is not there and save yourself an incredible amount of
time and expense, 2) learn that the equity is as expected and proceed with your
deal, or 3) learn that there is more equity and perhaps take advantage of
upsell opportunities.
When it comes to the worst case scenario (scenario 1), you
know that you don’t want to lose money on bad deals. How do you value your time
and relationships with your clients and lenders? The cost to run an automated
valuation is negligible when compared to the incredible amount of time that is
wasted underwriting an application, submitting it to the lender, the lender
underwriting it, etc. Maybe at this point the lender runs an automated
valuation. If they don’t, this issue may be uncovered later in the process
leading to even more expense.
Scenario #1 is common for a number or reasons - many
consumers have no idea what their homes are worth:
·
Because they live in an area that has been a hot
market and values are all over the place
·
They simply have no idea
·
They are in love with their house (and therefore
believe the value to be much higher than it actually is)
Many brokers, lenders and insurers are also using automated
valuations because this enables them to offer superior services to their
customers. Where an appraisal will be required on a deal, running an automated
valuation in advance can save your clients the expense of paying for an
appraisal if they have incorrectly estimated the value of their home.
Almost every mortgage agent or broker knows what an
appraisal is, but there continues to be some confusion over what an automated
valuation is and the fact that they are available to mortgage agents and
brokers. We hope that this blog has shed some light on each one as well as on
their relationship to one another.
If you would like more information about automated property
valuation please visit www.purview.ca/brokers
or call 1-855-787-8439.
No comments:
Post a Comment