Automatic Valuation Models (AVM) provide an estimate of the value of property and can be used to speed up the bridging loan application process.
As discussed in a July 2017 BridgingAndCommercial.co.uk article, AVM technology uses mathematical modelling that analyzes the value of property by comparing property values in an area. Some AVM reports also access previous surveyor valuations.
An AVM report can be produced in a matter of seconds for residential and commercial property. It can also assess rental values. The disadvantage of the AVM process is that it does not take into account the condition of the property.
An AVM report can be the sole valuation report, or can be used as a guide to help a valuer.
Some bridging lenders use AVM reports for low risk, low loan-to-value deals without the need to send out valuers to the property. This saves a great deal of time processing the loan application, as well as the cost of a valuer’s report.
Not all lenders are prepared to rely solely on an AVM report, but they can use AVM to help them make an initial offer of a loan, which can then be confirmed after a valuer’s report has been produced. Brokers can use an AVM report to assess the viability of a property deal that requires bridging finance.
Benson Hersch, chief executive of the Association of Short Term Lenders, has advised lenders to be cautious about relying on AVM technology. AVMs are useful for low-risk loans that need to be completed quickly.