"The reliability of Automated Valuation Models (AVMs) has been thrust into the spotlight in recent weeks, following groundbreaking changes in the way these models are now being tested. The implications for home equity lenders, who rely heavily on AVMs to determine property values, could be far-reaching, especially as the industry grapples with new regulatory questions about risk management and model accuracy."
"At the heart of this disruption is the decision by AVMetrics, the nation's only independent AVM testing firm, to stop allowing AVM model companies to use list prices in their AVM testing methodology. This decision challenges an industry norm that has long relied on the list price of properties to help determine AVM valuations. But testing by AVMetrics and others has shown that many AVM models don't just use list price, they anchor to it."
AVMetrics has stopped allowing AVM providers to use list prices in AVM testing methodology. Independent testing has revealed that many AVM models anchor to list prices rather than treat them as neutral data. Anchoring to list prices can inflate valuations and produce inaccuracies for home-equity lending, which typically excludes listed properties. Release of poor performance results for some top AVMs indicates that existing AVM testing approaches may be outdated and flawed. Home equity lenders must respond quickly as a federal AVM regulatory framework goes into effect on October 1st. AVM providers that rely on list prices argue more data improves accuracy, while supporters call for removing list prices from testing.
Read at www.housingwire.com
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