One of the required services when buying or selling a home involves an appraiser. Consumers should know that various valuation products (appraisals, AVMs, BPOs) may produce different values and cause confusion for borrowers.
You should understand the differences between the valuation products they may receive before closing on a home loan and the relative reliability of each product. When reviewing valuation products, keep in mind that:
An Appraisal is an opinion of value performed by a professional state-licensed or -certified appraiser. It complies with the Uniform Standards of Professional Appraisal Practice (USPAP), which requires appraisers to be independent, objective, and impartial. An appraiser must remain unbiased and produce an opinion of value that is credible, or worthy of belief. An appraisal by a competent professional appraiser is the most reliable of all valuation products.
An Automated Valuation Model (AVM) is a computer-generated estimate of a property’s value that a lender might use in some circumstances to assist in evaluating the collateral for a mortgage. The output of an AVM is heavily dependent on the quantity and quality of the data input. With proper use, an AVM can help support the findings of an appraisal, but when used alone its output may not be credible.
A Broker Price Opinion (BPO) and a Comparative Market Analysis (CMA) is typically prepared by a real estate