In this article
If you are an existing homeowner, you may be looking to see how much your property is worth now that some time has passed.
This can be achieved in various ways, though one you may come across more often online, especially if you have signed up to our 24/7 mortgage monitor, is an AVM, an Automated Valuation Model.
The way an AVM is described by the Royal Institution of Chartered Surveyors as a system that uses one or more mathematical techniques as a way to create an estimation of a properties value at a specific date. This is accompanied by a confidence score that determines how accurate it believes it to be.
Having an Automated Valuation Model undertaken can potentially save time and money, as it will often negate the need for an actual person to go out and value/research your property.
Automated Valuation Models (AVMs) may not always be accurate, especially if your home has had recent improvements, extensions, or is in an area with different property types that the system may not pick up on. If you need a more accurate property valuation, our mortgage advisors can arrange a professional home assessment that considers your property’s features and local market conditions.
Types of AVM
There are a variety of different Automated Valuation Models across the world and in the United Kingdom. Over here, there are 4 prominent models that are used.
The first model you will find is completely automated, without any human intervention.
The second AVM works just like model one but adds a manual review if the property valuation needs to be confirmed.
The third is an outsourced surveyor overview and the fourth is an in-house valuer assisted AVM, both of which are classed as desktop valuations.
Common Uses of Automated Valuation Models (AVMs)
Automated Valuation Models are used for many different reasons, with each of these depending on the company that is using an AVM.
One common use of an AVM is to check property values early in the mortgage process, helping lenders make quicker decisions without needing a full physical valuation. It can also be used to see if a property value has changed during a term.
AVMs can also help mortgage lenders assess potential risk if a customer misses payments, ensuring the property’s value still supports the loan. In the event of arrears, lenders may use AVMs to check whether the property would still cover the remaining loan balance if sold.
A second AVM is sometimes used to verify the results of a previous property valuation, helping to ensure accuracy. Some AVM systems can also assess multiple properties at once, making them a cost-effective option for companies managing larger portfolios.
Additionally, AVM’s may also be used as a way to quickly estimate any potential tax implications linked to tax planning, as well as to identify and potential fraudulent activity.
Automated Valuation Models (AVMs) can also be used to value entire property portfolios, making them ideal for large-scale property assessments. AVMs support a range of business needs, from estimating market value and managing financial risk to simplifying property audits.
Understanding AVM Confidence Scores
A confidence score will be an indicator of how accurate an Automated Valuation Model may have estimated the value of a property. Confidence scores in AVMs reflect how reliable the property valuation is, based on available data and recent home changes. Variations in confidence scores are expected, especially when property data is limited or not recently updated.
There are different measures used in the United Kingdom to determine what sort of scores are given, based on the relevance of the data that is available to judge the figure against, to name but one.
For a detailed understanding of AVM confidence scores and what they mean for your home, speak to our mortgage experts today.
Pros and Cons of an AVM
Starting with the positives of AVMs, they can help mortgage lenders with lower-risk lending decisions, save time, resources and money, and remove the risk of fraud from human intervention.
While Automated Valuation Models (AVMs) offer speed and convenience, they’re most effective when backed by accurate and current property data. For homes with recent upgrades or improvements, a professional valuation can provide a more detailed and reliable assessment.
If you’re unsure about an AVM result, a manual property valuation can offer peace of mind by giving you a clearer understanding of your home’s true value. Our expert mortgage advisors can arrange a full property valuation to make sure your home is assessed accurately.
