An AVM Tale

[CindyR]

Thought some of you might be interested in a summary of an AVM I came across recently. I was asked to perform a retrospective appraisal on a property in the Phoenix area which is now Lender Owned. The loan, from early 2007 was for a refi based on an AVM. Interestingly, the AVM was included in the work file.

The house was a typical tract home in a typical subdivision in the west valley. The property has sold, through MLS, only one week prior to this refinance transaction. The house was listed in MLS at $215,000 and sold thorough MLS after a reasonable market exposure period for $209,000. My opinion of value was $210,000 based on lots of recent similar comps, ranging from $210,000 to $244,000 in the subject master planned community. My comps were all from December 2006 and I included a pending and an active.

The AVM assigned the property a value of $268,000. The AVM reported 6 sales ranging from $205,000 to $240,000. AVM sale dates ranged from March 2005 to September 2006. It appears the AVM assumed some rate of appreciation for its older sales and did not recognize that the Phoenix market was no longer appreciating and had actually been declining for the past 9 months.

The AVM also did not report the correct owner of the property (based on the sale only 1 week prior) but apparently this did not represent a red-flag of any sort for the lender. The AVM also reported the lowest reasonable value at $243,000; highest at $296,000.

Just thought some might find this interesting.

 

[Blueprint]

Could not even tell you how much appraiser business is probably lost today because AVM's come in higher than appraisers.

 

[Bearslide]

It is indeed interesting. I have seen a number of loans recently where the borrower was upside down - and the inflated value was provided by an AVM, not an appraiser. Yup, gotta give credit to those smart lenders who decided to save a buck or two and use an AVM instead of boots on the ground. The lender got EXACTLY what they paid for - garbage. Bet the borrowers paid for a full appraisal............

I would LOVE to know how much of the bad paper these lenders are holding was based on AVMs.

 

[timd354]

Thought some of you might be interested in a summary of an AVM I came across recently. I was asked to perform a retrospective appraisal on a property in the Phoenix area which is now Lender Owned. The loan, from early 2007 was for a refi based on an AVM. Interestingly, the AVM was included in the work file.

The house was a typical tract home in a typical subdivision in the west valley. The property has sold, through MLS, only one week prior to this refinance transaction. The house was listed in MLS at $215,000 and sold thorough MLS after a reasonable market exposure period for $209,000. My opinion of value was $210,000 based on lots of recent similar comps, ranging from $210,000 to $244,000 in the subject master planned community. My comps were all from December 2006 and I included a pending and an active.

The AVM assigned the property a value of $268,000. The AVM reported 6 sales ranging from $205,000 to $240,000. AVM sale dates ranged from March 2005 to September 2006. It appears the AVM assumed some rate of appreciation for its older sales and did not recognize that the Phoenix market was no longer appreciating and had actually been declining for the past 9 months.

The AVM also did not report the correct owner of the property (based on the sale only 1 week prior) but apparently this did not represent a red-flag of any sort for the lender. The AVM also reported the lowest reasonable value at $243,000; highest at $296,000.

Just thought some might find this interesting.

I am glad that the lender is having to eat this loan.....that's what they deserve for making a loan based on an AVM.....I sincerely hope that the lender loses a whole lot of money on this one.........but at least they saved a few hundred dollars for not having an appraisal done.

 

[Blueprint]

I would LOVE to know how much of the bad paper these lenders are holding was based on AVMs.

I'd be the first in line to get those numbers. Can anyone put a price on AVM's? Peace sells, but who is buying?

 

[Bearslide]

The AVM assigned the property a value of $268,000. The AVM reported 6 sales ranging from $205,000 to $240,000. AVM sale dates ranged from March 2005 to September 2006. It appears the AVM assumed some rate of appreciation for its older sales and did not recognize that the Phoenix market was no longer appreciating and had actually been declining for the past 9 months.

The AVM also did not report the correct owner of the property (based on the sale only 1 week prior) but apparently this did not represent a red-flag of any sort for the lender. The AVM also reported the lowest reasonable value at $243,000; highest at $296,000.

And nobody in underwriting saw anything wrong with this fuzzy math? And yet, if an appraiser tried to pull that, there would be stips galore. "You can't have a value of $268,000 when your highest sale is $240,000".

Do the deal, do the deal..............whole lotta red flags ignored.

 

[Atlanta CG]

Perhaps the only resolution is to make the bank buy the loan back if it goes belly-up. That way they will have to eliminate the AVM's and VP's (value pushers) (tired of "skippy").

 

[Karl]

Cindy; PLEASE!!! contact me. Karl

 

[Mike Kennedy]

And nobody in underwriting saw anything wrong with this fuzzy math? And yet, if an appraiser tried to pull that, there would be stips galore. "You can't have a value of $268,000 when your highest sale is $240,000".

Do the deal, do the deal..............whole lotta red flags ignored.

As long as UW either directly, or de facto, reports to Loan Origination...... they are paid to "be fuzzy".

 

[c w d]

AVM's allow all parties plausible deniability. The lender can say it's the company who produce it's problem. The company who produced it can say there was a glitch/bug in the system. And since the AVM isn't going to fess up and tattle on their masters who else are the regulators going to ask? Oh yeah....the log files. They're useful as long as that feature is turned on, not editted or not deleted. There's no need to have a paper trail either.....since we're now a paperless society *snicker* that's just oh so 20th century. And, if it's good enough for our election process, it's good enough for our financial well being too.