Notes

AVPs: The Cost-Effective Alternative of Appraisal
Over the course of last couple of years the worst nightmare of several Real Estate Appraisers is that they're being replaced by way of a "black box" that won't require them to appraise the properties in future and will act as the "final value determining factor" for any property. This thing has become more active to some extent, but it hasn't replaced appraisers. Alternative Valuation Products or AVPs in short have been achieving this from quite sometime. But it doesn't mean that AVPs may replace appraisers in the future. According to The Appraisal Foundation folks, this is of an AVP is as follows:

"AVP is a product that communicates an opinion of value or price other than the traditional appraisal."
Now let's learn a little more about these AVPs:

What are some typically common examples of AVPs?

Given below are some common examples of AVPs:

Broker Price Opinions or BPOs: Next time when you hear BPO in virtually any property related talks, don't misunderstand it as Business Process Outsourcing. Broker Price Opinions will be the mostly used AVPs today. There is no specific form or format for BPOs - several were built and tweaked according to the requirements of users over the course of years.

Comparative Market Analysis or CMAs: Very similar to BPOs, CMA is a product that was found in an identical fashion but by the agents. But in modern times its usage has expanded. Pending sales and active listings may also be used as well as closed sales for assisting homebuyers and lenders in CMAs. And exactly like BPOs, there's no universally utilized form or format for CMAs too.

Automated Valuation Models or AVMs: To a big extent, the credit of this worst nightmare about which we talked above in this posting goes to AVMs. Simply because AVMs utilize several mathematical formulas and data for calculating the worthiness. Although some appraisers retain negative feelings about AVMs, still the truth is that they have been making their mark in the valuation marketplace from a steady pace because of their accuracy. The only downside of AVMs is that they rely largely on data and in some circumstances data may necessitate filtering by an appraiser.
Which kind of clients use AVPs?

For clearly understanding that what sort of clients use AVPs you should first understand where AVPs are not allowed. Under the Title XI of FIRREA, all federal transactions and real-estate related transactions (transactions which include sale, lease, renting or refinancing of real property) must be conducted after a USPAP-compliant appraisal. So AVPs aren't requested such transactions. AVPs are usually requested by loan servicers, government-sponsored enterprises and hedge-fund companies. Sometimes they're also used by potential homebuyers, insurance companies and marketing agencies.

Why do clients use AVPs instead of appraisal?

If said in a single line then due to the fact it saves time and money. But there may also be various other reasons too in specific cases (i.e. for analyzing additional analytical values).

Are AVPs USPAP-compliant?

The short and dirty answer to this is "Maybe". Based on the Appraisal Foundation, no product or format can always be USPAP-compliant. check here ought to be useful for different circumstances.

So can AVPs replace appraisals down the road?

In short, the solution is "No." The Appraisal Foundation still believes a properly conducted appraisal by professional appraisers is the "gold standard." But yeah, in some certain circumstances we may see the increased using AVPs in future rather than appraisal.

This article was compiled by Ashish Bhatnagar for increasing awareness about AVPs in appraisers. http://www.ieimpact.com is really a company that provides appraisal data entry for appraisers. It is possible to learn more about their appraisal data entry services at http://www.ieimpact.com/appraisal-data-entry/.
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