topic Re: Figure.com - Wildly Inaccurate AVM Appraisal in Mortgage Loans

Figure.com - Wildly Inaccurate AVM Appraisal

petermacanderson — Fri, 05 Aug 2022 00:19:17 GMT

Hey folks. Think this might be my first post!

I'm exploring HELOC options as we plan to add new features to our home (I need a bigger office as I'm 100% remote and need more space, plus we have a baby on the way next month so the office would double up as a spare guest room when the baby room becomes occupied!).

I'm not ready to pull the trigger yet as just getting rid of the last of my credit card debt. I'm probably going to go down the CU route (Penfed, or Suncoast as I'm in FL) but I'm a big fan of disruptive technology so I went through the motions with Figure.com and was instantly told my house didn't meet the valuation. Thought that was quite odd. A little bit of history:

Bought the house July 2020 for 240k, at the time it was worth around $380k. Put $100k into getting it up to shape. We refinanced with cash out in April 2021, and it appraised at $550k. It was a big win for us. We paid off [very generous] family members and were left with other cash to pay off credit cards. Mortgage was $440k at 80% LTV

Both wife and mother and law flip houses and know the trade. They were actually underwhelmed with the $550k appraisal and expected around $600k. But it is what it is. We still struck gold.

Fast forward 18 months: Zillow is Zestimating our house at $705k and Redfin is more conservative at $660k. You have to take both of these with a massive pinch of salt, however the real estate experts in the family know they're not entirely unrealistic. One smaller, older and more dilapidated house sold for $900k a few blocks down. It's a desirable neighborhood where deer roam freely and you're more likely to get hit by a golf cart than a car.

Today, Figure's absurd AVM model arrived at $347,000. How is this even possible? I brought up the report and it has a confidence score of zero. Go FIGURE!

Has anybody else experienced this from Figure or other online fintechs using AVM? I'm obviously going to go somewhere that uses common logic, but curious what others have seen.

Re: Figure.com - Wildly Inaccurate AVM Appraisal

Bill77 — Fri, 05 Aug 2022 01:04:13 GMT

How did you buy a house for 240k that was worth 380k?

Re: Figure.com - Wildly Inaccurate AVM Appraisal

ShanetheMortgageMan — Fri, 05 Aug 2022 02:25:58 GMT

AVM's are more accurate for cookie cutter suburban homes with a lot of sales within the last 6-12 months. If it's more of a rural property or not in a subdivision, there are lack of recent sales or it's a custom home that is when I've found them to be considerably off. When you feel the AVM is off a lot of HELOC lenders will still offer the option for a full blown appraisal at your expense.

Re: Figure.com - Wildly Inaccurate AVM Appraisal

petermacanderson — Fri, 05 Aug 2022 03:33:23 GMT

@Bill77 wrote:
How did you buy a house for 240k that was worth 380k?

Great question and not a straightforward answer. The house was neglected and in need of substantial repair. The owner wanted a quick sale and we paid cash (borrowed privately from a family friend).

My wife and her mother flip houses so there was a substantial amount of sweat equity to get it up to todays appraisal value, but we really did get the place for a steal despite it being in disrepair.

Re: Figure.com - Wildly Inaccurate AVM Appraisal

petermacanderson — Fri, 05 Aug 2022 03:35:26 GMT

@ShanetheMortgageMan wrote:
AVM's are more accurate for cookie cutter suburban homes with a lot of sales within the last 6-12 months. If it's more of a rural property or not in a subdivision, there are lack of recent sales or it's a custom home that is when I've found them to be considerably off. When you feel the AVM is off a lot of HELOC lenders will still offer the option for a full blown appraisal at your expense.

Well that sounds about right. Very non-cookie cutter and very rural! No subdivision.

Unfortunately Figure doesn't have alternative valuation methods.

Re: Figure.com - Wildly Inaccurate AVM Appraisal

DSTforlife — Fri, 05 Aug 2022 16:31:15 GMT

when i was looking into HELOCs earlier this year, I was confused by how Figure came up with their LTV. it wasn't straight forward and the amount to lend was much lower than I wanted.

I suggest going the credit union route...but be careful with Penfed. Penfed did a hybrid appraisal for free, but it came back much lower than I anticipated....so we went with a local credit union that used AVM which valued the home as I expected.

Re: Figure.com - Wildly Inaccurate AVM Appraisal

petermacanderson — Fri, 05 Aug 2022 21:20:15 GMT

@DSTforlife wrote:
when i was looking into HELOCs earlier this year, I was confused by how Figure came up with their LTV. it wasn't straight forward and the amount to lend was much lower than I wanted.

I suggest going the credit union route...but be careful with Penfed. Penfed did a hybrid appraisal for free, but it came back much lower than I anticipated....so we went with a local credit union that used AVM which valued the home as I expected.

Yeah, I saw some of your posts elsewhere in the forum where you said PenFed's appraisals came in lower than expected. I'm probably going to try Suncoast and see what happens there

Re: Figure.com - Wildly Inaccurate AVM Appraisal

mgs2010 — Fri, 19 Aug 2022 03:53:36 GMT

Just so you're aware, many many lenders use the same or similar AVM for HELOCs. It's extremely rare for a heloc to have an actual physical appraisal of the property. That said, don't overthink it. They analyze their data based on the most recent purchase, NOT the most recent cash out refinance appraisal. So really, you're not even comparing apples to apples. How would figure, or any other lender for that matter, know what your house most recently appraised for? Cash out refi is different because you have an actual appraisal done but that appraisal is not a recorded document on file with your county - nobody can access it, including your property tax collector. The only parties who know about that appraisal are: you, your cash out refi lender, and the appraiser themselves. You're going to find that most AVMs will give you the same result for quite some time yet because it's basically taking the average appreciation rate in your area and applying that to your original purchase price, since most people don't purchase homes in disrepair. In other words, it's never going to AVM at it's true value until you sell it to someone else for top dollar. You broke the system by buying a home outside of their cookie cutter standards. You are going to need to discuss with any lender you speak with about a heloc if a physical appraisal is possible or if they would be willing to consider the appraisal you had done most recently for the cash out refi.

Re: Figure.com - Wildly Inaccurate AVM Appraisal

petermacanderson — Fri, 19 Aug 2022 11:50:28 GMT

Really good to know, thanks!

Re: Figure.com - Wildly Inaccurate AVM Appraisal

Locutus9 — Mon, 29 Aug 2022 18:16:31 GMT

I also bought a fixer in Florida and searched for a HELOC provider to pay for the work. One local CU said they would only use the automatic valuation, while the next one said they only would do a full appraisal. We later refinanced the entire mortgage, which paid off the HELOC. I wish they had subordinated so that we could still use the line.

Re: Figure.com - Wildly Inaccurate AVM Appraisal

homeloanexpert — Sun, 04 Sep 2022 15:30:13 GMT

@petermacanderson

Same thing happened to me. I recently applied for a home equity line of credit. Due to the substantial equity in my property, the loan officer told me that I qualified for the no appraisal option. When he told me what the AVM value came in at, I almost fell out my chair. Now in my case, it really did not matter. I wasn't taking out that large of a line of credit. But if I needed to, I would have opted for a full appraisal. I think with the declining values, the system is set to be more conservative.

Re: Figure.com - Wildly Inaccurate AVM Appraisal

URHomeInvestments — Sat, 29 Oct 2022 20:10:58 GMT

@petermacanderson I am also located in Florida and wonder which lender you ended up going with. Did you find a FL lender who used a drive by appraisal (like Space Coast FCU does) or whether you used the AVM. I need to work on building out our office, as well.