AVM bridging loans

If your bridging loan application qualifies for an AVM, no physical valuation is required – that’s the main benefit of an AVM bridging loan. The lender will use the automated valuation as the basis for lending, so you won’t need a surveyor to inspect the property. However, this is conditional on the AVM result meeting the lender’s criteria. For example, the AVM must return a confident valuation within the expected range. If the AVM comes back with uncertainty or a value that doesn’t support the loan amount, then the lender may request a traditional valuation after all. Additionally, if any aspect of the deal falls outside the AVM program (property type, loan size, etc.), a physical valuation would be needed. In summary: you generally won’t need a survey for an AVM bridging loan, but be prepared for the lender to switch to a physical valuation if the automated route isn’t satisfactory.

AVMs are fairly accurate for standard properties – that’s why lenders are comfortable using them for many cases. These models analyze extensive property data and sales comparables, often yielding a valuation in line with what a professional surveyor might conclude for a typical house. In fact, lenders require that the AVM have a high confidence score (usually 4 or 5 out of 5) before they’ll accept it. A confidence level of 5 indicates the model is very sure about the value based on available data. That said, AVMs provide an estimate. They can be less accurate if the property has unique features or if there haven’t been many comparable sales recently. A surveyor’s appraisal involves judgment and an on-site condition check, which an AVM can’t fully replicate. So, while an AVM might nail the value for a 3-bed semi on a street where lots have sold recently, it might be off the mark for a one-of-a-kind rural cottage. Overall, for mainstream properties an AVM’s accuracy is high enough that lenders trust it for lending – but borrowers should use common sense. If you believe the AVM has missed something (e.g., your property’s new extension or a structural issue), discuss this with your broker or lender.

No, typically not. The majority of AVM bridging loan offerings are restricted to standard residential properties. Houses in multiple occupation (HMOs) and commercial properties usually do not qualify for AVM valuations. This is because their valuation involves additional complexity – for HMOs, the value might be tied to rental income and yield, and for commercial properties, there may be specialized factors (leases, business use, etc.) that automated models aren’t equipped to handle. Lenders almost always insist on a traditional valuation for HMOs and commercial assets to get a professional’s opinion on those nuances. There may be rare cases where a small HMO (e.g. a 4-bedroom house let to 4 individuals) in all other respects looks like a standard house – if the lender views it as a normal residential security, an AVM might be possible. But as a rule of thumb, if your property is an HMO or commercial, plan for a physical survey. Aura Capital can still arrange fast bridging finance for these properties, but we’ll line up a valuer quickly rather than rely on an AVM.

The main points to consider (besides what we’ve covered above) are: interest costs and exit strategy. Some AVM/no-valuation bridges may charge a bit more in interest or have slightly higher fees. Always check the overall cost and ensure it makes sense for your project’s profitability. Also, have a clear exit strategy (repayment plan) for the bridge – whether you’re selling the property or refinancing to a longer-term loan. The speed of an AVM loan is great, but it’s still a short-term loan that needs repaying, and the absence of a detailed valuation doesn’t change that fundamental risk. Make sure you’re confident in the property’s value and your exit, since the lender is essentially trusting the AVM – and you should have confidence in your asset as well. If you’re unsure about any of these aspects, speak with our team for guidance before proceeding.