In the world of home equity lending, many properties are straightforward. They fit neatly into data models and are surrounded by comparable sales. But what happens when you get an application for a property that breaks the mold? A rural home on acreage, a historic house with custom additions, or a property in a rapidly gentrifying market with wildly fluctuating values.
For these non-standard properties, a one-size-fits-all valuation approach can be risky. An automated model might struggle, and a full appraisal might be overkill. The most successful lenders navigate these challenges with a smart, flexible strategy—a “valuation cascade” that applies the right level of scrutiny for each unique situation.
Here’s how to start building a confident valuation strategy for your most complex properties.
Step 1: The Trigger – Start with a Smart AVM
The process for every property, standard or complex, should begin with a high-quality Automated Valuation Model (AVM). But the key isn’t just the value estimate; it’s the confidence in that estimate.
When you run a VeroVALUE AVM, pay close attention to the Veros Confidence Score (VCS™).
- A high VCS indicates that the model has robust data and a high degree of certainty in its valuation. For a standard property, this might be all you need to move forward.
- A low VCS is not a failure. It’s an intelligent trigger, a crucial signal from the system that this property has unique characteristics, sparse data, or market volatility that warrants a closer look. This is your cue to escalate to the next step.
Step 2: The First Look – Add an Inspection
When the AVM signals for help, the first question is always, “Why?” Is the data incomplete, or is there something physically unique about the property? Combining the AVM with a property inspection provides immediate clarity.
The VeroVALUE AVM + ValINSPECT™ approach pairs data analytics with real-world visuals. An in-person or virtual inspection can instantly confirm:
- Property Condition: Is the home in disrepair, or has it been beautifully renovated?
- Unique Features: Does it have a custom-built workshop, an unusual layout, or other features that public data simply can’t capture?
- Neighborhood Context: Are there signs of new construction or decline in the immediate vicinity?
This step adds critical context to the AVM’s data, often resolving the uncertainty and providing a reliable, verified value at a fraction of the cost of a full appraisal.
Step 3: The Expert Analysis – Bring in a Human Analyst
What if the complexity lies not just in the physical property but in the market itself? For properties with few comparable sales or those in turbulent markets, you need human interpretation. This is where a residential evaluation becomes essential.
Valligent’s eVAL™ solution is designed for this middle ground. It escalates the process to a highly trained analyst who can:
- Synthesize complex data: They dig deeper into market trends, sales history, and location-specific nuances.
- Accurately assess unique features: Unlike an algorithm, an expert can properly weigh the value of unconventional features.
- Provide a supported valuation: The result is a reliable, IAEG-compliant report that is more robust than an AVM but faster and more cost-effective than a full appraisal.
Step 4: The Definitive Answer – Escalate to an Appraiser
For the highest-risk, most unique, or highest-value properties, there is no substitute for a state-credentialed appraiser. When the complexity is significant or regulations demand it, this is the final and most definitive step in the cascade.
You still have flexible, modern options:
- ValPRAZE™: This bifurcated appraisal uses a licensed professional for the inspection and an appraiser for the desktop valuation, delivering a fast, cost-efficient, and compliant report.
- Traditional Full Appraisal: For the ultimate in due diligence, a full appraisal provides a comprehensive interior and exterior inspection and the most detailed analysis available. With a network of over 10,000 licensed and certified appraisers, we can handle even the most remote and challenging assignments.
From Uncertainty to Confidence
Valuing complex properties doesn’t have to be a gamble. By using a strategic valuation cascade, you can apply the right level of scrutiny to every loan, turning uncertainty into confident, data-driven decisions. This approach not only protects your portfolio but also streamlines your workflow, saving time and money.
Ready to build a more flexible and robust valuation strategy? Contact us today.
