AVM… What? Why You Need to Know What an Automated Valuation Model is

Automated Valuation Model: a tool every real estate sales professional should be taking advantage of!

If you don’t already know what an AVM is, it is essentially a statistical model that analyzes property data and provides an estimate as it relates to the value of a property.

AVMs are relevant to your daily job arranging mortgages for very obvious reasons: it is a very fast and accurate way to validate the value of a property or properties in a particular neighbourhood.

But wait - there is far more to AVMs than just that!

You see, with the introduction of Purview For Mortgage Brokers - a tool that enables mortgage agents and brokers to request AVMs – is rather recent, AVMs have been around far longer and historically have been used by banks and insurers as important data acquisition tool.

Ever wonder why, when you send a deal to a bank, from time-to-time they disagree on value without having requested an appraisal? Ever wonder how insurers, from time-to-time, will disagree with a value – without having requested an appraisal? In most cases, both likely reviewed an Automated Valuation Model - the examples can go on from there!

Of course all brokers have different tools and resources; some mortgage agents and brokers will count on what their client tells them with respect to a property value, some will pull comparable sales comps and some will look at an AVM. But which of these options is going to give the most accurate value, most consistent with what your lender and the insurer may surmise?

The beauty of technology is that it has leveled the playing field, giving mortgage brokers and lenders access to the same tools, thereby setting the stage for very powerful alignment. This means that you can ask clients for information, but then use technology to back it up with sales comps and an AVM.

At the end of the day, the lender has to agree with the value and finance your deals, so using the same tools they use ensures that you are working with the same information and prevents surprises, leading to more closed deals.

Furthermore, an AVM could reveal more equity than you may have thought was in a property, thereby enabling you to upsell your deal before it even makes it to the lender. Bonus!

Are AVMs accurate? Absolutely. Because they are fully automated, statistically valid and there is no emotion as it relates to generating a value – the AVM doesn’t like or dislike the property based on what they see. Instead, it analyzes cold, hard numbers. You can bet that with an AVM you will have a realistic idea of the value of your client’s home and that it will be consistent with the value that your lender will accept.

Don’t just rely on what your client tells you, or get stuck with a value that does not match your lender’s. Use an AVM to get a far more accurate picture. Call Purview For Mortgage Brokers today at 1.855.787.8439.

Spot an Opportunity and Upsell, Upsell, Upsell

Refinance mortgages represent such an incredible opportunity to both you and your clients. We can all remember the deals where equity came up short on appraisal or once submitted to CMHC. For as many deals that you may have that come up short on the equity side, you likely have as many that come up with more equity than even your client anticipated – especially in hot markets like Toronto and Vancouver.

True to the old adage ‘assume makes an ass-out-of-u-an-me,’ how about those deals that you pass on because, based on the client interview, you assume that there isn’t enough equity?

Missed opportunities = equal missed $$$! More equity could change entirely how you structure your deal, where you send it and what you pitch to your client.

A general rule of thumb: always ask a client when they purchased their home and what they paid for it, or if they have recently had their property appraised and what value it came in at. This can go a long way where there has been a fairly recent purchase or appraisal or in markets that are not seeing rapid gains.

Automated valuation models are so widely used today by lenders and brokers as an affordable means to assess the value of a property in a matter of clicks that there is really no reason not to take advantage of them. Cost? The negligible cost far outweighs the savings in lost deals and new opportunities that you may identify.

When a client has extra equity that wasn’t anticipated, that is the time to upsell, upsell, upsell. Take a look at the client’s credit report - are they being burdened by debt? Perhaps something that simply begins as moving a client to a new first mortgage lender could be turned into a consolidation that saves your client thousands in payments and interest.

Perhaps an equity second mortgage at 70% LTV that you could only get funded through a private lender could go to a trust company or an MIC with another 10% equity that you may not have even realized was there. Perhaps there is an opportunity to offer an HELOC behind the mortgage you are arranging?

In some instances, things can become slightly more complicated than on CMHC insured deals. Why? Because if you assume that there is less equity than there is and use a private lender’s appraiser, but then the deal comes in higher, that appraiser may not be on your other institution’s lender-approved appraisers list, making moving the deal that much more complicated.

Making a point to spot upsell opportunities and coach other agents in your brokerage to do so as well leads to more business for all – you, the brokerage and the lender - and is almost always a win for your client when you have a well thought out plan.

Purview For Mortgage Brokers has the tools that make identifying upsell opportunities easy. Take advantage of them by calling 1.855.787.8439 today.  

Getting Back to Basics – Whose Responsibility is it to Verify a Homeowner’s Information?

We routinely blog on this topic because it is something that continually comes up. Reshaping thinking on this topic means that the industry stands to save billions in deals that perhaps should not have been funded – and brokers stand to save thousands in lost deals.

All real estate sales professionals, mortgage agents, mortgage brokers and real estate lawyers, should be asking for a client’s identification as a part of basic due diligence. But does this happen all the time? No. Separate from checking your client’s ID, a second measure that all of the above really should also be taking is to validate who is the legal owner of the home.

If you have one client with ID and more than one legal homeowner, that is a problem. If you have two clients, one with ID and the other without, and two homeowners on title, this is a problem. If you have a client who is not presenting photo identification, this is yet another problem.

Good identification means an original passport or driver’s license, coupled with a birth certificate for example. Verifying that the person presenting the identification is the only person on title means running a search to see what is on record with the land registry.

The responsibility question comes into play when we think about just how many real estate and financial professionals leave it to the real estate lawyer to check this information – which is far too late in the mortgage underwriting/funding process if you ask us.

By the time a deal makes its way to the real estate lawyer, typically speaking, the real estate sales professional, broker, appraiser, lender and all other parties involved have performed their services and now must wait for the deal to close to get paid. When a deal blows up on closing, getting paid doesn’t happen and considerable time and expense is wasted on all sides.

This does not even cover the issue that your client may have innocently not mentioned another person on title because it is a parent or grandparent and they simply forgot or did not think it important enough to mention.

Undisclosed people on title will always be discovered before closing because the real estate lawyer will validate this – but is this their responsibility and their responsibility alone? We think not.

Technology has provided us with so many tools and resources that a real estate sales professional and broker for that matter are both positioned to validate this information effortlessly.

There is really no reason to not check identification nor validate who is on title to a property. The extra due diligence goes a long way to not only saving you time and money but strengthening relationships with lenders and other partners as well as improving the level of service you offer your clients.

Purview For Mortgage Brokers has the tools to make due diligence, including validating homeowner identities, easy. Call us today at 1.855.787.8439. 

What are House Price Indices and What Do They Mean to You!

When we hear in the news about the state of our housing market, values of homes in different areas around Canada, values by type of home, averages, increases and decreases in values - we have house price indices to thank for all of this.

House price indices give valuable insight into the direction of the housing market. These insights not only enable you to optimize what you are doing now but also give you the ability to plan marketing initiatives and even workflows based on what you could be anticipating in the future.

So what is a house price index exactly? Simply put, a house price index is an automated program that measures the price changes of residential housing. The Teranet National Bank House Price Index (HPI) is a great example.

The 3 most common methods used to calculate house price indices are:

• HR – Hedonic regression: This method analyzes the item being researched by its characteristics and makes its estimates based on the value of each characteristic. Hedonic indices are most commonly used by professionals who work in the area of appraising real estate, financing real estate, and those who evaluate the economics of real estate.
• SMA – Simple moving average: This method is a calculation that analyzes data by creating averages within a full data set. The simple moving average is the unweighted mean.
• RSR – Repeat sales regression: This method uses repeat sales from the entire market.
• Economists, banks, real estate sales professionals, real estate appraisers, government and brokers alike use house price indices.

Let’s use the recent news with respect to the Toronto housing market and the fact that the average prices of a detached home in Toronto is now 1 million dollars as an example – we have house price indices to thank for this information.

Knowing what is happening in the housing market across the board enables you to offer your clients better services and have more involved discussions about how their mortgage financing could be structured to anticipate changes or simply to measure if a home being presented is presenting a value consistent with what the market is calling for.

These are also a great marketing tool for brokers! Paying attention to news about house price indices enables you to leverage that content in your blogs and other marketing and presents you as a thought leader.

How can you track house price indices? One way is to stay on top of announcements. For example, the Teranet National Bank House Price Index is released on a monthly basis – release dates can be found here: http://www.housepriceindex.ca/Default.aspx. Don’t want to have to remember to check? You can also subscribe to receive a monthly report in your inbox.

Don’t get stuck without all of the available information. Make use of house price indices and have the info you need, whenever you need it. Purview For Mortgage Brokers has you covered. Call today: 1.855.787.8439.