Help – I’m mystified about Automated Valuation Models

Oct 1, 2021 | Housing Surveys

For those of you who haven’t come across an Automated Valuation Model (AVM) before, it’s essentially the process of allowing a computer algorithm to value your home instead of an in-person valuer. No one will visit the property in this system, and definitely not even a robot!

To determine the value, the algorithm assesses the current market, the basics of a property such as number of bedrooms, and compare with other properties for sale in your area, creating an estimated value of a property. It also uses historical information about the property and neighbouring properties.

While AVMs have been around for some time – some of the more well-known companies like Hometrack started out in the early 2000s – it has been suggested that changes in the industry over the last five years created a ‘tipping point’, with the pandemic bringing this way of valuing properties to the forefront. And, while the RICS posed back in 2017 whether AVMs were going to become more prominent in the distant future, the future turned out to not be so distant after all.

During 2020, AVMs allowed properties to be valued remotely, meaning that valuers didn’t need to go into someone’s home, not only keeping them safe but the homeowners themselves. This provided some peace of mind that in-person valuations were unable to guarantee when social distancing was at its peak.

With the digitisation of data, improvements in technology and a demand for companies to have staff focus on higher-value work, AVMs have been a key element in moving valuations in line with other industries where services seem to be increasingly available online.

The service is typically used by lenders to assess lower-risk lending situations, when the value to be loaned isn’t high relative to purchase price, and for this example the lenders aren’t likely to be out of pocket. So, while the service isn’t necessarily large-scale at present by lenders, should you come to sell your home in the future, it could be used to value your property. This is because some lenders have improved on their AVMs during 2020, when they had the time do so due to the property market shutting down at the start of the pandemic.

Lenders such as Halifax, Barclays, the Leeds Building Society and HSBC are already using AVMs more regularly to value your property and decide whether the property will be suitable security for the loan you or your buyer have applied for. However, these valuations are run in the interest of the lender, and not you so it’s best to keep that in mind should your lender use an automated valuation model to estimate the value of the property you’re buying.

Another point – no one is actually inspecting the property for significant faults to the building.

Should I use an AVM to find out the value of my property?

If you are looking to find out the value of your home or the place you’re considering buying, then it might be worth using an online AVM which will give you a rough value without having to have someone visit your property or paying a fee at this stage.

Remember that will be the lender’s decision, and not yours, so you have no say in the matter. In addition, AVMs can be used by a person who is not a fully qualified Chartered Surveyor.

Websites such as uses an algorithm that claims to value your home within 15 per cent of real-time property values. While sites like Zoopla use an AVM built by Hometrack to help you value your home, although they do state that it should not be used in place of an estate agent valuations – nor as professional valuations for lending. If you know that your future home is being valued based on an AVM, it’s good to know the pros and cons to this, and ensure that you are being treated fairly by your lender.

In instances where an AVM is not suitable, potentially where the loan-to-value is high, then an in-person valuation will be carried out, however down the line these requirements could change, and like other industries, head fully online. It would be wise to ask if your lender is using that method.

Pros of having your home valued using an AVM

  • They can be favoured by lenders for lower-risk lending situations.
  • Can provide an analysis on observations to do with a property that might not be observed by a valuer.
  • It saves money, time and resources for the lender and seller.
  • Removes the human element therefore reducing risk of fraud – but see be

Cons of having your home valued using an AVM

  • The property is not inspected, meaning that it may not be in the average condition that it is valued against.
  • The property is not seen by a qualified Chartered Surveyor, nor is any check for faults actually made.
  • There is little consumer transparency, meaning it creates difficulties in informing consumers.
  • The system relies on comparable data, meaning if there is low quantity of similar properties or the quality of data is poor, the valuation could be incorrect.
  • How is the comparable data collected and any issues with that, including what were previous sales based upon?
  • Technology is not immune to fraudulent activity.

Please note that Eyesurvey do not carry out any form of valuations for lenders – we work only for the actual client.

Les Long FRICS FISVA Principal, Eyesurvey

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