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30 | M R EP O RT FEATURE based on an estimate of the cur- rent loan-to-value of a property. Similarly, these models might be used by a variety of home improvement companies targeting potential prospects for direct mar- keting offers to replace or repair the property's existing roof, pool, HVAC, or landscaping or to offer other improvements. Consumer-Grade AVMs C onsumer-facing models are used extensively in online real estate and lending portals. They offer a quick reference tool to help consumers understand what a home is worth and what potential financing options might be for a certain property. Online lenders, proptech firms, and iBuyers use these types of "white-labeled" AVMs to engage consumers for prospecting, initial screening, and to instantly triage deals and channel prospects to the ap- propriate product. These AVMs also provide a high hit rate, but with looser tolerances since no underwriting requirements are built into the model. They also can include owner-stated property conditions, upgrades, and past appraisal results. Lender-Grade AVMs L ender-grade AVMs play a criti- cal role in the determination as to whether to underwrite a loan. They include multiple data sources to produce a valuation with a high-confidence score. These more sophisticated AVMs frequently layer in multiple submodels, including regres- sion analysis, appraisal emula- tion, data mining, current and historical market performance in the area, and the latest machine- learning modeling techniques. The submodel results are then blended, weighted, and reconciled by a final model to produce the property valuation. AVMs are using new sources of data that are harder to acquire. These can include geospatial characteristics, true neighborhood boundary information, and the "holy grail" of AVM modeling— the current condition and quality of the property versus similar properties in the comparable geographic area. Many valuation experts believe the availability of property condition and quality data will produce a paradigm shift in the lending and investing markets. Lastly, the convergence of cloud computing and new data extraction techniques with access to property condition and quality data is enabling AVM perfor- mance to reach new heights. Many observers believe that this new generation of AVMs will be realized in the not-too-distant future. When this next generation of AVMs becomes the norm for the industry, the continuous feedback loop will drive AVM modelers, researchers, and users to un- derstand how these models are performing in "real life." JON WIERKS is VP of Analytics Solutions for First American Data & Analytics. DS News is the only publication in the country solely dedicated to providing default servicing professionals with news and content focused on their industry. SUBSCRIBE NOW! Connect with us online at DSNews.com. SUBSCRIBE TO THE LEADER IN DEFAULT SERVICING NEWS THEFIVESTARINSTITUTE