An automated valuation system (AVS) is a quick way to value a property without doing a full human appraisal.
AVSs (a.k.a. AVMs, GVMs, or GVSs) are basically massive computer databases of public records. They use comparable sale data to value billions of dollars of real estate every year, and they do it in seconds or less.
Given their efficiency, AVSs have been catching on with more lenders. While they’re not perfect (some question their accuracy and their occasional fraud allowance), AVSs have two compelling advantages: speed and cost.
Lenders and mortgage professionals love pushing out fast approvals without appraisal conditions. If you’ve got a tight closing, or you are a broker keen on prompt service, then choosing an AVS lender is a definite stress reliever. There’s no waiting for appraisal appointments to be booked, waiting for the appraiser to view the property, waiting for the appraisal report, waiting for the underwriter to review the appraisal report, yada yada…
On the cost side of things, AVSs are also a clear winner. If they’re not free altogether, they’re as cheap as $50-$75. That compares to upwards of $250 or more for a human appraisal.
For most clients, free is pretty appealing. That’s especially true on a refinance. Sometimes applicants pay $250+ for an appraisal only to find out their house isn’t worth enough to support their desired loan amount.
Speaking of cost, some lenders out there charge for AVS appraisals. Others don’t. Other things near-equal, most mortgage professionals clearly prefer lenders with free AVSs. For some reason though, lenders who charge for AVSs seemingly don’t realize that.
Last modified: April 26, 2017
Do certain banks do this vs not do this? I just got pre approved through BMO, they had to send a person to do the appraisal of our current house.
How would you go about getting one of these if you weren’t in the market to buy or sell? (ie. could I contact a company to get one of these done personally?)
The tricky thing is to see how these computer schemes work in an economic downturn. When prices are going up, then any errors are hidden by time. I think they can provide a quality cross check to the human appraiser to help to determine which appraiser is more accurate than the next. But if you take the bread off someone’s table, they will be just a little quicker to take it off of yours.
But I’m biased – because I’m an appraiser
Stephen, just contact a real estate agent for a free market evaluation. If you need an appraisal then you have to go the old route and have an appraiser through your house and prepare an appraisal report. These automatic appraisals only give a yes or a no that a property falls within a certain price range. They do not give you a precise value.
Stephen, You can get one from http://www.homevaluationscanada.com
Hi Jason,
Not all lenders use AVSs for every mortgage. Some don’t rely on them at all.
On insured deals (i.e., > 80% loan-to-value) AVSs are quite common.
On conventional deals (i.e., <= 80% LTV) human appraisals are more common. Cheers, Rob
Just a question on home appraisals in general. I just signed a mortgage at say 200 000$ on a existing property. My plan was to put down 40 000 so i do not need to pay any CMHC insurance. BMO now will be sending a appraiser to my future home to evaluate it. What happens if the evaluation comes back at a lower value, say 190 000. will my Down payment of 40 000 still be enough to avoid CMHC insurance. what happens if the evaluation comes back as being higher than the 200 000?
Thank you in advance
The lending value is based upon the purchase price or appraised value, which ever is lower. If the appraisal comes in at $190,000 then to stay conventional, the bank will lend $152,000 and you will need to increase your down payment to $48,000 If you do not have the extra $8k then this loan will need to be insured.
interesting, ours was less then 80%.
I even had to take an hour off work.
Just wondering Gordon. What did you mean by this: “But if you take the bread off someone’s table, they will be just a little quicker to take it off of yours.”
which lender are using this AVS for 80% ltv or less as it will speed things up.
last i heard it was Td bank and BNS
thank you
I thought all the big banks were except National Bank. I know FirstLine does sometimes.
I trust humans way more than a machine. Machines can’t tell about the propery’s current state (if it’s in good or bad shape), if it’s had reno’s etc.