Automated Valuation Model: Using the Right Model at the Right Time
In today’s economy, using the wrong automated valuation model (AVM) can compromise your organization’s profitability and ability to compete effectively. An overvaluation of home equity collateral can needlessly expose your organization to loss.
The problem with AVMs lies in the fact that they are mathematical models. Without knowing the actual formulation or market validation method used to calculate AVM results, comparing one AVM to another is nearly impossible. Some AVMs use historical data, which may not correspond to current market conditions, while others may use municipal averages for similar properties without considering the property values in the immediate area. It is completely possible for three AVMs to give three different valuations on the same property.
In light of the tightening housing market, it is essential to get the valuation correct the first time around.
Making the right call
To make a valid appraisal, the appraiser should know about comparable housing sales and offer an accurate view of market trends. Understanding the housing locations, demographic shifts and property dynamics is essential in making the right valuation, but different appraisers use different models — each with their own pros and cons.
One example of how this could be problematic is when a potential customer calls you to extend a new line of home equity credit on a customer’s home. You need to assess the value of the customer’s home quickly and accurately to offer the best possible terms to the customer without jeopardizing the bottom line of the bank.
Using Equifax’s Collateral Value Connector, you receive the automated valuation model from multiple appraisers, and are advised about those valuations that are most accurate given current local market conditions. By entering the customer’s street address and zip code, you receive the most appropriate automated valuation model instantaneously. Southwest Financial Services, Ltd. vets the information exhaustively. Since 1983, Southwest Financial has been an industry leader in risk mitigation and property valuation.
Through these resources, you can obtain an affordable valuation on your customer’s property that minimizes operating costs, mitigates risk and is fully compliant with regulatory guidelines. With the possibility of a tightening housing market, can your organization afford to miss out on the best information available?
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