Check an AVM before you lend
This video walks hard money lenders through 7 checks to run on an automated valuation model (AVM) before a credit decision. Each check catches a different way an AVM estimate can be wrong.
The 7 checks in the video
- Data freshness. Comps older than 6 months are a red flag.
- Forecast standard deviation. An FSD above 0.20 means the model is not confident in its own number.
- Hit rate in your market. Test the AVM in the market where you lend, not on a national figure.
- A second model. When 2 AVMs differ by more than 10%, send the file to a secondary review.
- Recent appraisals. Compare every AVM estimate with recent appraisals.
- Property condition. The video calls condition the biggest blind spot AVMs miss.
- Random sample testing. Pull AVM-backed loans each quarter, compare them with actual outcomes and document the results.
Why lenders run these checks now
Since October 2025, a joint rule from 6 federal agencies requires documented quality control for every AVM used in a credit decision. Our guide to AVM quality checks explains each check and what examiners look for.
Where Homesage.ai fits
Homesage.ai reads a property’s condition from its photos and shows the comparable sales behind each estimated value. Both appear in the Full Property Report.
More for lenders
See how lenders use Homesage.ai on our lenders page.
Video transcript
180 words · 1:18
Press play, or click any word to hear it.
0:00Most lenders trust their AVM estimate without a second thought. But a fast number and a reliable number are not the same thing. Here are 7 AVM quality checks every lender should be running, especially now that the CFPB’s AVM rule is in effect.
0:15Start with data freshness. If your comps are older than 6 months, that’s a red flag. And check the forecast standard deviation. An FSD above 0.20 means the model itself isn’t confident.
0:28Next, test your AVM’s hit rate in the specific market you’re lending in. Then cross-reference at least 2 models. If the spread is more than 10%, trigger a secondary review.
0:40Benchmark every AVM estimate against recent appraisals. This is the most regulatory aligned method. And don’t ignore property condition. It’s the single biggest blind spot that AVMs miss entirely.
0:54Finally, build a random sample testing program. Pull AVM backed loans quarterly, compare them to actual outcomes, and document everything because regulators will ask.
1:06Homesage.ai gives you condition-aware valuations, comp analysis, and quality checks, all in one platform. Visit Homesage.ai to see it in action.