Avm On A $400,000 Home

[Willie]

Y'day, I got an order because the AVM kicked out a $393,000 value and the regional bank needed $405,000. The bank is a mid sized regional bank with a lot of name recognition in my area. It is for a HELOC. I don't know the loan size. I didn't realize they would or could use AVM's on $400,000 homes.

 

[Scott Kibler]

Loan size sets the policy.

 

[Willie]

Loan size of the HELOC, is the way I take it. But what if the HELOC is $100,000, and the first is $249,000?

I'm sure only the HELOC is considered. Again. ....

 

[Tony in Ohio]

you still do appraisals on HELOC's?

I have not done one here for several years. <_<


They say they are secured by the property, but I dont think the banks even believe it. Its a credit based loan with more leeway, because they have leverage to threaten foreclosure if the borrower gets behind. I dont think they really count on gettingmuch of it back, so they use AVM's

 

[Willie]

Originally posted by Tony Kohnle@Mar 2 2005, 12:34 PM
you still do appraisals on HELOC's?

I have not done one here for several years. <_<


They say they are secured by the property, but I dont think the banks even believe it. Its a credit based loan with more leeway, because they have leverage to threaten foreclosure if the borrower gets behind. I dont think they really count on gettingmuch of it back, so they use AVM's

When the AVM does not work, apparently.

 

[Mickey Stevens]

On the subject of AVM's I was thinking. We all know there are huge problems with the accuracy of these things. However, I can see why some lenders may be okay with them. Many stories have been told on this forum about appraisals that are way off. We've all seen some of these. Hopefully, more of us are doing a good job than not but I just can't help but wonder, if there were really any way to determine, what the actual accuracy rate of appraisals are versus AVM's. I'm sure the rate for appraisals would be higher than AVM's but how much higher. By the number of bad appraisals discussed on here and that we've all seen it's nowhere near 100%. Any thoughts?

 

[Lost Cause]

I think when considering the loan size on a HELOC that it would be the first plus the HELOC, no? William, in your example, I've gotta think the loan size would be considered $349,000. But I don't really know.

And Mickey, I think the biggest problem with AVM's is not that they are consistently off, but that when they're off, they can be so terribly far off.

As much as I don't care for AVM's, I think most lenders that use them only use them on very low risk deals - very low LTV, superior creditworthiness, additional collateral, etc. They probably are fine for that, though I would never recommend that my bank employ them...

 

[Lone Star]

Mickey, you pose an interesting question. I'll bet there is more than one answer - depending on who is asked. I would like to believe that any good appraiser would be more accurate in determining market value on a batch of say 6 or more individual properties than an AVM would be - even in a cookie cutter urban market. That number should be enough for a trend to emerge, etc. In a rural area, I think an AVM would be useless in many cases.

But take skippy and perform the same test, and in the eyes of a bank, that avm might not look all that bad.

Now in the eyes of morty the mortgage broker, the answer might be: whatever my underwriter will accept, and is the cheapest, fastest, and comes in the highest.

It would be interesting to compare avms and appraisals done on the same property against actual selling prices over a period of time to see the results. But even that is probably not a real test of accuracy, since too many variables would still play a part.

 

[Paul Ness MAI]

The individual transaction amount determines the type of appraisal required, even if there is a large first in front of the current transaction. As long as the current transaction is less than $250,000, an AVM or lender's evaluation can be used.

 

[Edd Gillespie]

Originally posted by William Robinson@Mar 2 2005, 12:21 PM
Y'day, I got an order because the AVM kicked out a $393,000 value and the regional bank needed $405,000. The bank is a mid sized regional bank with a lot of name recognition in my area. It is for a HELOC. I don't know the loan size. I didn't realize they would or could use AVM's on $400,000 homes.

I thought one of the benefits of an AVM was that unlike an appraiser they did what they were told and cheaper than a Skippy. Maybe there's hope. Bet if you end up at $350K or so they'll go back to the AVM. Can they put pressure on an AVM? How did you find oiut the AVM did wrong? Does this raise any flags for you?

This leads me to ask a question I have had in the back of my mind or maybe somewhere else.
Why do the lenders need any particular value from from an AVM or a Skippy or an appraiser or the internet if they are doing this on credit anyway? Why are we still appraising anything in this brave new world?