Homeowners who just got an AVM appraisal waiver

Automated Valuation Method (AVM)

Every year millions of people either buy a home or refinance a current mortgage. Traditionally, someone applying for a mortgage would obtain an appraisal from a licensed appraiser before their loan application is approved by an underwriter. The appraisal report issued by the appraiser gives an independent valuation of the home.

However, not all transactions use an appraiser. Some use an Automated Valuation Method (AVM).

What is an AVM?  

An AVM is a home valuation service that uses a computer algorithm to provide real estate property valuation estimates using public data and math. Some mortgage transactions use an AVM instead of a licensed appraiser if the loan applicant is granted an “appraisal waiver” from the underwriter. 

The Appraisal Waiver

An appraisal waiver is when underwriting approves the use of an AVM for a mortgage transaction. An appraisal waiver can be granted for both a refinance and purchase transaction. Generally, there is no charge for an appraisal waiver.

How Do You Get An Appraisal Waiver

Before the underwriter approves the appraisal waiver, they typically receive an appraisal waiver from the Automated Underwriting System (AUS) the underwriter is using. The two most common AUS programs are Desktop Underwriter (DU) from Fannie Mae and Loan Product Advisor (LPA) from Freddie Mac.

In the AUS approval the underwriter receives, Fannie Mae or Freddie Mac will agree with the estimated value listed on the application, and when that happens, the underwriter is able to grant an appraisal waiver.

Mortgage loans in which the borrower extracts cash (i.e., cash-out refinances or renovation loans) are generally not eligible for an appraisal waiver.

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AVM examples

Previously I used the Automated Valuation Models used by Fannie Mae and Freddie Mac as AVM examples. There are additional AVM examples, and they include;

While they all do the same thing, evaluate a house and issue a valuation, they don’t all work the same way.

Do VA Home Loans Offer An AVM?

Yes. Under the VA home loan program, a loan applicant is eligible for the VA home loan AVM. If you are applying for a VA home loan, be sure to discuss your options with your loan officer.

How do AVMs work?

Appraisal AVMs use the following data inputs to assist with issuing an estimated value for the home. Depending on the model, these data points might be weighted differently for each model. They work by computing the various data inputs listed below and giving them a level of importance (weight).

That level of importance directly impacts how they work.

  • Total square footage of the house based on permit records from the county. If there is an ADU, that will be included as well.
  • Number of permitted bedrooms.
  • Number of permitted bathrooms (full, half, and quarter bathrooms are included).
  • Location of the property.
  • The age of the house.
  • Land size per public records.
  • Comparable sales within a half mile to a mile.
  • Current market trends.

This is a list of the most common data inputs; most of them use additional inputs in their evaluation.

Using the above data inputs, the AVM is able to issue an estimated value of the property. Some models issue a valuation range (i.e., $500,000 to $550,000) rather than a specific estimate value. It’s important to note that the models used by Fannie Mae and Freddie Mac don’t specifically issue to the underwriter a set value. Rather these models either “agree” or “don’t agree” with the valuation that is listed on the loan application.

How Do I Request An AVM?

When you apply for a mortgage, you do not need to request an AVM. When the loan officer submits your file to underwriting, the underwriter will review the file to include the granting of an appraisal waiver using an Automated Valuation Model.

AVM vs. appraisal

The biggest difference between an AVM and an appraisal is that an AVM is usually free, and an appraisal has a cost. The cost of an appraisal is usually $500 – $800 or higher (depending on the property and current demand).

An additional difference is that AVM is immediate, while an appraisal takes time. With an AVM, the results are quick, and you do not have to wait to receive your valuation estimate. With an appraisal, it takes days or weeks before the appraiser inspects the property, completes the report, and issues a valuation estimate.

As you can see, there are significant differences between an AVM and an Appraisal.

AVM pros and cons

Here are the AVM pros and cons:


  • The process is automated.
  • Zero cost to the loan applicant.
  • Immediate decision on the estimated value.
  • Possible higher valuations for properties that are not updated.


  • Do not account for house or property improvements.
  • Nuances are missed.
  • Renovated homes are usually not given full value.
  • Square footage not listed in county records is not used.

You should discuss the pros and cons with your loan officer to see if an AVM is right for your transaction. If your home has been renovated, and you need the value to come in at the higher end of the neighborhood range, you probably should avoid the underwriter’s Automated Value Method results and hire an appraiser to inspect the property and issue an estimated value.

Bottom line on automated valuation method (AVM)

An Automated Valuation Method (AVM) on a mortgage transaction is a useful process to determine the estimated value of a home. If an appraisal waiver is granted by the underwriter, the loan applicant will avoid having to pay the usual appraisal fee. Keep in mind that if your loan approval is based on the value coming in on the higher side of the neighborhood range and the home has been remodeled or renovated, then you’ll want to hire an appraiser and have them issue an estimated value.

Loan Officer Kevin O'Connor

About The Author

Loan Officer Kevin O'Connor has over 17 years of experience as a Mortgage Loan Originator and is a trusted resource for mortgage education and information. He's the content creator of K.O. Home Loan Solutions and is licensed by the state of California and the Nationwide Mortgage Licensing System. He has a top rating with the Better Business Bureau, Google, Yelp, and Zillow. You can contact him at 1-800-550-5538. CA DRE #01499872 / NMLS #247447