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Micro vs. Macro: Using Real Estate Valuation Models in Your Forecasting

real estate valuation models

When it comes to real estate valuation models, automated valuation models (AVMs) are one of the most popular for lenders. There’s a reason for that — well, more than one reason. AVMs bring value in underwriting and validating that the home you, the lender, is financing is worth it.

But there are more advantages to using the data contained within an AVM. Many banks have traditionally used that information to manage risk by forecasting certain items, such as:

  • The value of portfolios’ assets in comparison to mortgages.
  • Stress testing their portfolio to look at different scenarios should property values decrease.
  • Identifying problem areas where they may want to tighten up their lending.
  • Enforcing on defaulted mortgages.


This can also forecast where to heavy up or pare back on marketing spending or adjust messaging based on trends and changes to a neighbourhood or demographic. This couldn’t have been more relevant than in the example of the transformation of Regent Park in Toronto — an area with a traditionally low-income population and high-crime rate that is transforming into a higher end of the city with new condo developments.

For decades, Toronto’s Regent Park was not the most desirable neighbourhood. But since 2005, a partnership between development firm The Daniels Corporation and the Toronto Community Housing Corp. has been revitalizing the neighbourhood, constructing tens of thousands of square feet of public spaces. The once-infamous location is now home to summer camps, soccer fields, an aquatic centre, a six-acre park, athletic grounds, a cultural hub, shopping facilities, and a farmer’s market. Condos in Regent Park sold for a reported $380,000 in 2015. Properties in the neighbourhood continue to be a wanted commodity in 2017 as developers build more condos.

AVMs can help you identify what other neighbourhoods might be up-and-comers, even without the checkered history of Regent Park.

An AVM produces an estimate of the market value of a residential property based on the analysis of public record data, property location, market conditions and real estate characteristics at a specified date. AVMs can save time and money, flag potential risks, and are convenient to access. They’re also objective — no opinions or exceptions are possible. Valuations can’t be swayed or influenced by emotions or personal prejudices. There’s no risk of fraud with an AVM. It doesn’t replace a full appraisal, since it doesn’t take into account the external and internal condition of the property, but it can help you glean further vital information.

Interested in using an AVM as your real estate valuation model? Purview can provide you with the tools you need. Call us today at 1.855.787.8439 or visit

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