Lenders can use them when speed is of importance to a transaction. They are a useful tool for monitoring LTVs during loan terms and reducing the need for revaluations – they can also be a trigger for revaluations. 

Valuers can use AVMs to assist them in their due diligence process when carrying out a valuation. Homeowners or investors may use them to get a view on the value of their house, which in turn may lead them to consider remortgaging or to plan their next move.

It has long been recognised that valuation is an art and not a science, whereby valuers need to make judgements regarding intangible property related features based on their experience and property market conditions in a specific area. However, in today’s world, where the accuracy and amount of data capturing is increasing – for example, land registry recorded sales, available information of statistics, including house price growth in different regions across the UK etc – it can become more exact as this information can be feed into a computer-modelling system that can provide an estimate of value, ie an ‘automated valuation’.

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In my opinion, AVMs are a useful tool for bridging lenders as they can take away the need for a property inspection and speed up the valuation process. This is useful when time is of the essence and perhaps the LTV is small enough that the lender is prepared to rely on an automated estimate of value as opposed to a full red book valuation in their lending decision. 

However, AVMs bring associated risks. A surveyor has not inspected the property so immediate assumptions are being made on the condition of a property. In addition, professional indemnity insurance will not be available, so if the advice they have relied upon turns out to be incorrect, then there is no protection for the lender. 

Also, AVMs are only as good as the information or data that is provided, which is based on historical information. Take a street of terraced houses, for example, one house may have been extended, one may have been vandalised etc; without a surveyor inspecting the property, the accuracy of the AVM is difficult to quantify. AVMs are also significantly less reliable in say rural areas or in respect to non-mainstream properties due to the lack of comparability and lack of sufficient sales evidence. Therefore, they should always be taken with a health warning.