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An Automated Valuation Model (AVM) is a computer-generated estimate of a property’s market value, produced from recent comparable sales and property data instead of an in-person appraisal, that lenders and insurers use to confirm value quickly on lower-risk files.
An AVM draws on databases of recent sales, property characteristics, and market trends to generate a value estimate in minutes rather than the days a licensed appraisal can take — and it costs less.
Lenders and default insurers typically reserve AVMs for straightforward, lower-risk files — renewals, refinances, or purchases where the loan-to-value is comfortably within guidelines — and still order a full appraisal for unique, rural, or higher-risk properties.
Like a traditional appraisal, the AVM’s estimated value is what feeds the lender’s loan-to-value calculation. AVMs are especially common at renewal or refinance, when there is no purchase transaction to compare against.
Faster, not always a replacement: lenders and default insurers still order a full appraisal for unique properties, rural or unusual homes, or higher-risk files, even though AVMs handle straightforward ones.
Used across the lending chain: A lenders, B lenders, and default insurers such as CMHC, Sagen, and Canada Guaranty each maintain their own criteria for when an AVM is acceptable.
Feeds the loan-to-value calculation: the AVM’s estimated value, like a traditional appraisal’s, is what the lender uses to calculate loan-to-value rather than the purchase price.
Common at renewal and refinance: AVMs are frequently used to confirm current value at renewal or refinance, when no purchase price exists to compare against.
Definitions reflect Canadian federal and provincial rules as of the “Updated” date above. Not advice for any specific file.
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