August 23, 2022  //  BY Jon Wierks

AVMS: Taking a Giant Leap Forward ... Just in Time for the HELOC Wave

Automated Valuation Models (AVMs) have come a long way since they were introduced almost three decades ago. Initially developed as a tool specifically for appraisers to identify and score comparable property values, their added benefit quickly became apparent to lenders as a way for underwriters to validate appraisal values, ensuring they were in acceptable ranges for lending criteria. Today, AVMs are used not only by appraisers and underwriters – including lenders looking to gain an edge in the increasingly competitive HELOC market – but also by marketers to target and identify potential customers and by consumers via online real estate platforms that include property valuation as part of their offerings.

Early-version AVMs used county-level property data accessed via telephone modems that were connected to mainframe computers and provided outcomes in an astounding five minutes. Today’s AVMs provide property reports within mere seconds and access significantly more data points with advanced technology for more accurate and detailed results.

Now, after almost 30 years of using, honing and advancing AVMs, these work horses for the housing industry just took a giant leap forward with the introduction of the Procision™ AVM suite from First American Data & Analytics. This next-generation AVM suite uses the latest technology infrastructure, advanced blended ensemble modeling techniques and sophisticated machine-learning technologies with the industry’s largest property and ownership database from First American Data & Analytics.

The data is multi-sourced with daily updates on valuations for every residential property in the United States. Automated surveillance continually monitors the quality of data and valuations with extensive validation testing for various property types by geographic market. For added accuracy and consistency, the machine-learning component uses “back testing” data generated after the fact – including publicly recorded mortgage data, list price, sale price and property characteristics – to compare what the AVM initially generated, thus teaching the model to improve its results.

This new standard of accuracy and reliability is presenting expanded opportunities for uses and applications that go way beyond property valuation.


Turns Out One Size Doesn’t Fit All

As use cases for AVMs have expanded, it’s become clear that what may be a top priority for one user may not be the same for another among AVMs’ three primary measurement metrics: accuracy, hit rates (the percentage of properties for which the model is able to deliver a score) and confidence (achieving a certain percentage of scores within stated tolerance parameters).

Procision offers three AVM solutions that deliver specific benefits to meet various client needs. Procision Premier is an industrial-strength AVM for lenders uses multiple data sources, six sub-models including machine learning, regression analysis, hedonic appraisal emulation, and geographic-specific current and historical market performance to produce highly accurate valuations with high reliability scores appropriate for use in connection with underwriting loans.

Procision Power AVM is designed for consumer-facing and proptech applications, including iBuyer and online consumer-facing real estate portals. It provides an immediate estimate of a property’s value to help screen, prioritize and route prospects. This AVM offers quality valuations that fuel efficient online real estate transactions. Because strict underwriting requirements are not included, this solution offers a high hit rate with more valuation coverage among all properties.

Procision Direct AVM is a low-cost solution primarily used for portfolio monitoring and to market housing-related products and services to homeowners, based on the value, age and condition of their home. It provides values on nearly 100% of properties, delivering accuracy standards that meet the defined parameters for marketing use. With Procision Direct AVM, users can add a current loan-to-value estimate along with customizable options for demographic and geo-targeting, making it ideal for use by lenders to identify potential home equity lending prospects.

Now that refinance lending is somewhat receding, the industry is gearing up to respond to the anticipated increase in home equity lending; the Procision Direct AVM is tailor-made to give lenders a competitive advantage. The benefits of low cost, high hit rates and customized delivery options allow lenders to identify and target home equity prospects within strict budget parameters for higher ROI.

AVMs have long been a valuable tool. Now, with enhanced technology, increased data access, sophisticated machine-learning abilities, and seamless, integrated delivery options, they’ve become invaluable to those looking to leverage the most complete property valuation data available.  

 

As HELOCs continue to outpace originations and cash-out refis, it’s critical to stay ahead of the curve. Learn how the Procision AVM Suite can empower your business to make critical business decisions with greater speed and confidence. Click here to speak with one of our AVM experts.

 

 

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