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 The Mortgage Club, 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.
That being said, it may always not be as accurate, as it may not take into account things like home renovations, differing property types nearby, and so on. For a more accurate figure, you may be better off getting in touch with a member of our mortgage advice team.
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 is one that is automated, but if incorrect will alert an administrator to review.
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.
Automated Valuation Models are used for many different reasons, with each of these depending on the company that is using an AVM.
One way that they can be used, is to check a case ahead of time (before it is processed), to see if the figures that have been proposed are going to be sufficient, without needing to factor in the costs of a full human valuation. It can also be used to see if a property value has changed during a term.
Another way it can be used is for a mortgage lender to potentially future proof themselves against any risk, if their customer falls into arrears. Of course debts can lead to possible property repossession, so the mortgage lender will want to know that they could still make back their loan payment with a sale.
Sometimes when an AVM has already been completed, a company may seek to have another one taken out, as a means of auditing the previous AVM. There is also a model that can allow for valuations of many properties in one go, which is usually more cost-effective for the companies using it.
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.
There are some other ways in which these can work as well, such as to value property portfolios and more. Really it depends on the company who is using the Automated Valuation Model and what they are using it for.
A confidence score will be an indicator of how accurate an Automated Valuation Model may have estimated the value of a property. Low confidence scores normally come in when there is perhaps not enough data or unusual changes to a property.
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.
To understand this more in-depth, we would recommend speaking with a member of our team.
As with anything relating to mortgages, there are both pros and cons to having an Automated Valuation Model taken out. Looking at the positives, they can help mortgage lenders with lower-risk lending decisions, save time, resources and money, and remove the risk of fraud from human intervention.
On the other hand, they can be incredibly inaccurate due to the fact that an actual property inspection doesn’t take place, due to inconsistent or out of date information, and because the AI might not understand factors that a human might.
Of course, having inaccurate results can be an issue for you as a homeowner when it comes to getting your property valued. If you feel your valuation is inaccurate, you can get in touch with a member of our team today and we will look to rectify this for you.