White Paper Urges Investors to Value REO with AVMs

Automated valuation model provider Veros Real Estate Solutions makes the case for the use of analytical technology in determining the value of real estate owned portfolios in a white paper published this week.

“It is surprising that investors still lack fundamental information regarding the core risk-drivers within the real estate portfolios being analyzed, given the turbulent market of the past three years; the plethora of regulatory directives relating to transparency and analysis; and the substantial time and resources dedicated by those investors to improving their portfolio and risk management applications,” the Santa Ana, Calif.-based company writes.

It continues by arguing that AVMs are an ideal application for evaluating both whole-loan and REO portfolios, by optimizing capital investments and materially improving risk management platforms.

The paper doesn’t specify whether Veros advocates the use of AVM technology in collaboration or in place of broker price opinions, the traditional method used to determine value of REO properties—and a key component of the relationship between REO servicers and the local real estate brokers who coordinate and execute REO disposition. However, the company said the paper is the first in a series of three, with the second expected to more fully analyze the use of AVMs in REO valuations.

Veros said AVMs must incorporate REO conditions like property condition, time since foreclosure, REO inventory in the subject property’s vicinity and severity of REO discount to effectively determine current value and forecast future valuations.