More Homes With Negative Equity
According to a report issued by First American CoreLogic, 10.7 million (23%) of all U.S. residential properties with mortgages had negative equity at the end of the 3rd quarter of 2009.
The report further states that the average borrower of those mortgages owed $69,700 more than their property was worth.
How in the world could anyone accurately determine that information?
Source: DSNews.com
January 16th, 2010 Posted in Inside Real Estate
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By Chris Garvin on Apr 28, 2010
Yes, accuracy is a problem. The level of precision is not appropriate.
Public record data gave them debt outstanding…not much of an issue there…but as for the value:
“The current value was estimated by using the First American CoreLogic Automated Valuation Models (AVM) for residential properties. The data was filtered to include only properties valued between $30,000 and $30 million because AVM accuracy tends to quickly worsen outside of this value range.”
Looks like the AVM is a complex computer model…but still, at its heart, an appraiser (albeit electronic).
So yeah, accuracy’s an issue. But would you argue that the premise is plausible? Especially when a lot of those properties (2.4M) are in CA, where being >$100K upside down is not unheard of?
By Phil Hoover on Apr 28, 2010
Hi Chris ~
There are many flaws in the AVM systems.
One of the big ones is that there is no accurate public data for outstanding mortgage debt; only for the original loan amount.
Actual loan balances are private, confidential information.
Thus, if a borrower has paid down their mortgage, the data is incorrect.
There also is no accurate way for a computer (AVM) to accurately determine the value of any given property; doing so requires boots on the ground and eyeballs.
Property values can vary greatly depending upon upgrades, improvements, location, etc.