Automated valuation models (AVMs), broker price opinions (BPOs), and hybrid appraisals have become increasingly popular alternatives to traditional home appraisals. In order for lenders to make reliable decisions regarding property values, it is important that they are aware of the different options available and the pros and cons associated with each of them.
An automated valuation model (AVM) is a computer-generated estimate of a property’s value using data from public records, market trends, and other sources. AVMs are often used for basic mortgage lending decisions, but they lack accuracy and are not suitable for complex transactions.
Broker price opinions (BPOs) are estimates provided by real estate brokers or agents and are based on a visual inspection of the subject property. BPOs are usually more accurate than AVMs, but they can be subjective and require a physical inspection, which is difficult to do remotely.
A hybrid appraisal combines the use of an AVM, BPO, and an appraiser’s expertise. The appraiser reviews the AVM and BPO information as well as public records and compiles a report with their analysis of the property’s value. This method is often the most reliable appraisal option available, but it may not be feasible for remote situations.
Lenders should consider these three options when determining the value of a property. AVMs are typically the least expensive and most convenient option, but they may not provide the most accurate assessment. BPOs are a good middle ground option and can be done remotely if necessary, but they can be subjective. Hybrid appraisals provide the most reliable results, but they may not be possible in a remote situation.
In conclusion, the availability and affordability of remote home appraisals have increased due to the advancements in technology. There are various options available for appraisers to assess the value of a property remotely, including AVMs, BPOs, and hybrid appraisals. Each of these options has its own advantages and disadvantages that must be taken into consideration when making a decision about which method to use. Lenders need to weigh all of these factors carefully in order to ensure that they receive accurate and reliable appraisal results for their loans.
This article was contributed on Nov 20, 2023