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AVMs provide more accurate valuations than surveyors – JLM

by: Sebastian Murphy is head of mortgage finance and Rory Joseph is director at JLM Mortgage Services
  • 01/03/2021
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AVMs provide more accurate valuations than surveyors – JLM
The last year has shown the very real benefits of how we can all use technology to great effect, improving and speeding up the mortgage and purchase process and, crucially, making it more accurate for all involved.

 

We’re thinking specifically of lenders’ use and acceptance of automated valuation models (AVMs), particularly through the first lockdown last year, which appears in sharp contrast to the recent almost total return of physical inspections in some cases.

AVMs are a somewhat controversial subject in this space, although a large part of that controversy is bewildering.

Of course, a number of specialist lenders were unable to use AVMs because of issues relating to how they are funded and how they securitise their assets.

We would hope this has been rectified for the future, because in our view, the accuracy of the AVM should not be in doubt.

Indeed, we would go as far as to say we enjoyed the move to AVMs last year, with valuations coming in at highly accurate levels, and the models used working efficiently throughout the period. More of that please.

 

More accurate valuations

Can we say the same since physical valuations have become the norm again?

We’re not sure we can; indeed, the self-styled pre-eminence placed on the work of certain surveyors as somehow being more accurate than AVMs seems utterly misplaced.

A more cynical observer might think surveyors are trying to prove their worth to lenders, before their role is made defunct by technology.

The number of ‘down valuations’ – a concept some surveyors seem to believe does not exist but is a very real part of our market – is up, with some surveyors appearing to think they have a duty to ‘protect’ the lender against accurate valuations.

This concept no doubt being predicated on a belief that house prices are going to drop dramatically at a point in the future – with no-one being able to accurately say when.

 

Valuations based on last year

We wonder whether some surveyors have those 20-plus per cent drops in house price predictions still in their heads from last year, and are basing their values on those, rather than the current market, property supply, local comparables, and such.

It’s got to a point where we’ve had cases where the surveyor has down-valued the property by approximately three per cent on purchases, and been unable to provide accurate comparables for that decision.

This has led lenders to overturn these purchase valuations once they’ve been reviewed by their own staff surveyors.

And even after this type of result, we’ve still had to deal with a number of arrogant surveyors who dispute the black and white data they’re presented with and are still trying to flex their perceived muscles in order to get the lender to accept their flawed valuation.

If surveyors are taking this approach because they are fearful of greater use of AVMs, then they are going about it the wrong way.

Being inaccurate is likely to make AVMs more popular not less and placing a value on a property based on predictions last year, or a future drop which is not assured by any means, is only going to cause more work for all involved, and less trust placed in physical valuations.

In that sense, surveyors have been warned – the machines are on the march.

 

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