Considering that American homeowners hold more than $30 trillion in home equity, many lenders are using automated valuation models to improve their home equity lending’s accuracy and efficiency. Below, we discuss how AVMs are cutting home equity origination costs, reducing risk, and accelerating decision-making in four ways.
Over the past two decades, AVMs have become a “workhorse” lending tool. Recently, new data, increased computing power, and models based on artificial intelligence and machine learning have made AVMs even more reliable, accurate, and helpful. This came at the perfect time. It is essential for lenders and marketers to devise more precise marketing campaigns and engage consumers more effectively in consumer-direct settings in order to facilitate the process of obtaining home equity loans.
Balancing Cost and Risk with AVMs
With more advanced AVMs, lenders have new options, especially for clients with low loan-to-values (LTVs) and home equity line of credits (HELOCs). With AVMs and property condition or inspection reports, LTV ratios will be highly accurate, improving decision-making and reducing risk. Saving money by using a lender-grade AVM is a bottom-line benefit for lenders, regardless of whether they absorb or pass on the cost of property valuations.
Different AVM for Different Needs
In order to create an efficient marketing campaign, AVMs that provide accurate home values with high hit rates, delivered in bulk and at a cost that provides a significant return on investment are preferable to marketers mining data on home values.
White-label AVM solutions with total property coverage, presented via API, and embedded directly into their websites, are ideal for consumer-facing organizations that provide home values to engage customers.
In order to utilize AVMs in loan transactions, lenders typically prefer a lender-grade valuation model that is constantly updated and fully compliant with all applicable laws.
Enhanced Data Capabilities
In addition to more data, machine learning, and CPU power, AVMs are now more valuable than ever. As an example, geospatial data can improve the ability of AVMs to value unique properties and remote properties, which are often difficult to value with AVMs.
Drone views and improved imaging technology are providing a better perspective on what borders a property and how it feels in terms of its physical condition. AVMs will be revolutionized by these new capabilities.