In simple terms an automated valuation model or AVM is a method lenders use value a property without having to send a surveyor to physically view and value the property in person. Lenders will typically use this method for remortgages and internal rate switch applications, to avoid the cost of paying a surveyor to visit the property. 
Using an AVM can help speed up mortgage applications as the valuation can be completed instantly or within 24 hours, whereas a physical valuation may take a week or so to be booked in as the date has to work for the current owner and fit within the surveyor’s busy schedule. 
But how does an AVM work and how accurate is it? 
An automated valuation model uses online property prices and price indexes to statistically calculate the value of a property. They use the historic sales prices of comparable properties within those particular properties postcode, along with the rate of inflation to calculate today's value for that particular property. The model uses typical property characteristics for that postcode to help compare the value with others in its postcode. 
Automated valuation models are often accurate but there are a few characteristics that the model doesn’t pick up. Such as if the property has had an extension added, the property has been modernised or if majority of the properties in that area are unique. Areas such as new build developments will typically have very accurate valuations due to the high number of similar properties sold in a short space of time. Compared to an area of unique properties in an older area where very few properties have been sold. 
Typically, when switching your interest rate with your current lender they will have an online price index figure for your property using the same system. That figure can be challenged if you believe figure is inaccurate by instructing a physical valuation – this will come at a cost to the applicant. That cost will depend on the lender and who they use for their physical valuations. 
At Green & Green we use a software called ‘Hometrack’ which allows us to see the AVM figure and can use this for remortgage applications where the applicant may not know the value of their property. The final figure for any mortgage application comes down to the valuation figure produced by the valuer the lender instructs depending on which method they use. That figure can be challenged if the figure is not satisfactory, the challenge process will vary depending on the lender. 
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