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Tapton Capital | Automated Valuation Bridging Loans

Automated Valuation Bridging Loans (AVMs)

Bridging loans with Automated Valuation Models (AVMs) also known as desktop valuation bridging loans—provide short-term property finance for UK investors. In this article, we explain what AVMs are, how they can speed up bridging loans, what products qualify, and what the pros and cons are of using AVMs.

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What is an Automated Valuation Model (AVM)?

With an Automated Valuation Model (AVM), a property's value is estimated by analyzing data and algorithms without touching it. AVM generates an instant valuation report by analyzing recent sales, market trends, and property features. With AVMs, one does not need to visit the property to get an estimate; data-driven estimates can be provided immediately. A key advantage of this technology is its cost-efficiency, speed, and elimination of human error (RICS). AVMs have limitations, though (for example, unique properties or sparse data can challenge their accuracy.

Bridging Loan Applications Using AVMs

  1. Bridging loan applications with AVMs are significantly faster. According to the lender, bridging loan valuations will take 5–7 working days and cost between £500 and £5,000+. With a desktop valuation, the borrower can typically get a completed valuation within an hour of their appointment, without paying a single penny. As a result, bridging finance can save time and money by eliminating the on-site survey.

  2. Property auctions or chain collapses require speed. AVM-backed bridging loans may be completed in as little as 48 hours, cutting out the largest bottleneck (waiting for a surveyor). A traditional valuation often takes several weeks, whereas a traditional valuation is typically finished in under 10 working days. It gives investors a competitive advantage—you can secure opportunities quickly without having to worry about funding valuations.

  3. AVMs can save you from paying hefty valuation fees. Hometrack, Rightmove, or Zoopla data enables lenders to automate their valuation process. Since they are cheaper, AVMs often cost nothing or a minimal fee. Borrowers save on upfront costs and scheduling site visits is easier.

  4. AVMs are most suitable for standard properties and low-risk scenarios. Residential properties with many comparable sales are commonly valued using AVMs by lenders. The criteria for accepting AVMs will vary between lenders. Common terms include maximum LTVs (usually 60–70%) and limits on the type and value of properties. Depending on the lender, AVMs may be allowed on properties valued under £850k with loans up to £550k. The LTV limit might differ for refinances and purchases. The use of AVMs is greater in cleaning and more 'average' properties. There are some types of property that may not qualify for AVM, such as those that are unique or high in value or those that are located in very rural or undeveloped markets.

AVM Bridging Loans: Advantages

Bridging loans that use AVMs offer several key benefits over traditional valuations:

  • Execution Speed: Compared to booking a surveyor and waiting for their report, the loan process is much faster without the need to schedule a site visit. Lenders are often able to obtain AVM results within minutes, allowing underwriting to take place on the same day. It is possible to complete fast property finance, such as auction purchases or urgent refinancing, in just days.
  • Invest less upfront: With AVMs, you can potentially save thousands of pounds. Borrowers usually pay for RICS survey valuations, while lenders often pay for automatic valuations.
  • Simplicity & Convenience: Desktop valuations are easy to complete. Surveyors can access properties without coordinating access with property owners, there is no physical inspection, and there is less paperwork involved. A simplified application means fewer worries. Borrowers benefit from this streamlined and digital process, as they can rely on readily available data to make lending decisions.
  • Funding certainty: When lenders handle data in the valuation step, they can issue formal offers more quickly, which increases your chances of being funded. When negotiating property prices, you can take advantage of this. Sellers and agents may respond better if you can demonstrate you have bridge financing (with the valuation done by AVM).
  • Deal-winning edge: Competitive markets require fast completion. Bridging loans from AVM let you grab opportunities quickly, whether it's buying a discount property that needs a quick sale or refinancing to grab another investment. You may lose out to another buyer if you don't save the days.

AVMs vs. Traditional Valuations: Limitations

The AVM-driven bridging loan is a novel approach, but it also has some limitations:

  • Eligibility for property: Some types of properties are not eligible for AVMs. They work best in residential houses and flats. An AVM may not reflect the value of unusual property types (such as rural farmhouses, high-end luxury homes, or properties built on non-standard foundations). The AVM program usually excludes HMOs, commercial units, and very high-end properties. Ensure that your specific property qualifies for an AVM; otherwise, a chartered surveyor's valuation will be required.
  • Parameters for a conservative loan: On AVM deals, lenders often impose stringent loan parameters to mitigate risk. Limits on loan size and property value may also result (often around 60 to 70% of the property value). A lender will lend more cautiously without a human inspecting the property. Depending on your LTV and how much property you are financing, the AVM route may not be available or may have higher rates.
  • High rate potential: Depending on the AVM bridging loan, interest rates or fees might be higher. Using a model entails a bit more risk, so the lender may price in that risk. Tapton Capital's guide notes that no-valuation bridges often incur higher interest costs as a result of increased risk. It's important to decide whether the speed and savings on fees outweigh the extra cost. (The extra 0.1–0.2% per month may be worth it if you need to close a deal quickly.)
  • Availability reduced: Lenders do not all offer AVM valuations. Bridging products are limited by traditional methods. A specialist broker like Tapton Capital can help you find lenders that offer AVM bridging loans. However, you have fewer options. If your application does not meet the AVM criteria of a particular lender, you may need to repackage it or obtain a full valuation, which could cause some delays.
  • Confidence and accuracy requirements: AVMs are not infallible, even if they are usually accurate. Based on historical data and assumptions, they may not capture recent renovations or subtle features of the property. An AVM's confidence score must be high (usually 4 or 5) before lenders approve the loan. Depending on the AVM's confidence level or the estimated value, the lender might do a full valuation after all. AVM failures could delay the loan process. AVMs are most accurate in areas with many comparable sales and for properties in good condition. Changing markets or poorly maintained properties can confuse the algorithm.
  • Human inspection is not allowed: Certain issues might go unnoticed without a physical survey. An AVM cannot identify structural defects, unreported additions, or condition issues. Often, bridge lenders will lend "as-is," with no requirement for a perfect property. If issues are not disclosed, a property's value or saleability may suffer. Since an AVM won't flag any red flags, borrowers should make sure the property is in good condition before applying. Speed is gained but not the reassurance of an expert physically vetting the asset.

Bridging loans offered by AVM remain a powerful tool for investors who understand the trade-offs. For certainty of quick funding, borrowers often accept a lower LTV or higher rate. Having a backup plan (such as a rapid valuation) if the AVM does not work is important so you can work with a knowledgeable broker.

Frequently Asked Questions

What is the typical cost of Bridging Finance?

Bridging finance typically costs between 0.5% to 1.5% per month in interest, with arrangement fees of 1-2% of the loan amount. Additional costs may include valuation fees, legal fees, and exit fees. The exact cost depends on factors like loan-to-value ratio, property type, and your credit profile.

How long does it take to get Bridging Finance?

Bridging finance can be arranged in as little as 3-7 days for straightforward cases with all documentation ready. More complex cases typically take 2-3 weeks. Our team works efficiently to secure funding as quickly as possible for time-sensitive transactions.

What can Bridging Finance be used for?

Bridging finance can be used for property purchases (especially at auction), preventing property chain breakdowns, property refurbishments and developments, business cash flow gaps, and buying property before selling an existing one. It's versatile for any situation requiring short-term funding with a clear exit strategy.

Is bridging finance secured or unsecured?

Bridging finance is typically secured against property or land. This security allows lenders to offer larger loan amounts and more competitive rates compared to unsecured loans. The property used as security can be the one being purchased or another property in your portfolio.

What is the maximum LTV for bridging finance?

Most bridging lenders offer a maximum loan-to-value (LTV) ratio of 70-75% for standard cases. For strong applications with excellent security, some specialist lenders may go up to 80% LTV. Development bridging can sometimes achieve higher LTVs based on the gross development value (GDV).

How do I repay a bridging loan?

Bridging loans are typically repaid through a clear exit strategy, which should be established before taking the loan. Common exit strategies include selling the property, refinancing to a long-term mortgage, completing a development project, or receiving funds from another source like an investment or inheritance.