The Future of Automated Valuation Models (AVMs)
1. Smarter AVMs: Harnessing Advanced Technology
The next generation of AVMs is getting smarter by leveraging advanced technology and data sources. With the availability of new data and increased computational power, AVMs can now provide more accurate and reliable valuations. At the forefront of this technological revolution is First American Data & Analytics, a pioneer in developing advanced AVMs. Their AVMs are constantly updated with underlying data, retrained models, and valuations for every residential property in the country, ensuring accuracy and currency.
By incorporating AI and machine learning-based modeling, these AVMs can process vast amounts of data in a fraction of the time. This enhanced efficiency allows lenders to make quicker and more informed decisions, while marketers can craft precise marketing campaigns and engage with prospects more efficiently. The next generation of AVMs truly represents a significant leap forward in property valuation technology.
2. Balancing Cost and Risk: Cost-Effective Valuation Solutions
AVMs have historically been the valuation product of choice for home equity products due to their cost-effectiveness. Unlike first mortgages, home equity loans are usually low- or no-cost products for consumers. Therefore, lenders need to be as efficient as possible in originating these loans to protect their margins. The next generation of AVMs offers new options for lenders, particularly for low loan-to-value (LTV) clients and home equity lines of credit (HELOCs).
By using AVMs in conjunction with property condition or inspection reports, lenders can obtain highly accurate LTV ratios, further improving decision-making and mitigating risk. This combination of AVMs and additional data sources provides a cost-effective solution for lenders, saving both time and money. Whether the lender absorbs the cost of the property valuation or passes it on to customers, utilizing a lender-grade AVM is a bottom-line benefit.
3. Customized Solutions for Specific Needs
The next generation of AVMs recognizes that one-size-fits-all solutions are no longer sufficient. These AVMs offer customization options to meet the specific needs of lenders, marketers, and consumer-facing companies. For marketers, AVMs like Procision Direct provide accurate home values with high hit rates, delivered in bulk and at a cost that delivers a significant return on investment. Marketers can target prospects based on geography, loan balance, borrower demographics, and various other characteristics.
Consumer-facing companies can benefit from white-label AVM solutions like Procision Power, which offers total property coverage delivered via API with embedded data on their websites. Lenders looking to use AVMs in loan origination can rely on highly accurate lender-grade valuation models like Procision Premier. The Procision AVM suite also offers customizable search options and pricing structures to align with tightening budget parameters. The adaptability and customization of these next-generation AVMs make them invaluable tools for various stakeholders in the real estate industry.
4. Harnessing New Data Capabilities
The future of AVMs lies in harnessing new data capabilities to further enhance accuracy and valuation capabilities. Incorporating geospatial data into AVMs increases their ability to value unique and remote properties accurately. Improved imaging technology and drone views have the potential to capture the physical condition of properties and provide a better perspective on property boundaries and shape. These advancements will be game-changers for AVMs, allowing them to provide even more precise and comprehensive valuations.
As technology continues to evolve, AVMs will have access to a wealth of data that can improve their accuracy and reliability. By leveraging these new data capabilities, AVMs can address the challenges of valuing one-of-a-kind properties and provide more robust and insightful valuations.
5. Real Estate Board Data Partnerships: Enhancing Accuracy Through Data Sharing
Real estate boards in the UK have formed data-sharing agreements with AVM companies, providing access to listing data, conditional sales, and closed sales. These partnerships benefit both parties, with real estate boards generating revenue from their data-sharing agreements and AVM providers improving the accuracy of their valuation models.
By incorporating comprehensive and up-to-date data from real estate boards, AVMs can refine their valuation models and provide more accurate property valuations. These data partnerships play a crucial role in enhancing the accuracy and reliability of AVMs, ensuring that lenders and homeowners can make informed decisions based on trustworthy valuations.
6. Photo-Based AI: Unlocking Valuation Insights
Innovative proptech companies like FoxyAI and Restb.ai are revolutionizing the AVM landscape through photo-based AI. FoxyAI utilizes computer vision, AI, machine learning, and data science to convert property photos into actionable data. Restb.ai, on the other hand, leverages AI and technology to advance visual intelligence in the real estate industry.
Photo-based AI addresses the challenges of evaluating a property’s condition and quality, which have historically been constraints for AVMs. By extracting information from photos and assessing data points, photo-based AI enhances the accuracy of AVMs’ property valuations. Additionally, photo-based AI proves valuable in the appraisal review process, improving appraisal quality assurance and ensuring accurate valuations.
7. Leveraging Appraisal Data and Climate Change Insights
The UK leads the way in effectively leveraging appraisal data in partnership with AVM companies. One AVM provider in the UK not only offers valuations but also provides appraisal forms and technology for appraisers. This collaborative approach allows the AVM provider to validate, test, and refine their models using data from every appraisal report, resulting in improved accuracy and confidence in their products.
AVMs can also incorporate climate change data into their reports, as seen in the UK. With the recent emphasis on climate risk management by regulatory bodies like OSFI, AVM companies in Canada can include climate change data in their reports. This integration of climate data enhances the overall accuracy and relevance of AVM reports, providing lenders with valuable insights into climate-related risks.
8. Energy Efficiency and Property Square Footage Data
The UK’s focus on energy efficiency and property square footage data offers valuable insights for AVMs. Energy efficiency scores recorded at the individual property level demonstrate the correlation between energy-efficient homes and higher property values. AVMs can leverage this data to provide more accurate valuations and empower homeowners to make energy-efficient improvements.
In addition, the availability of property square footage data in the UK significantly improves AVM accuracy. AVMs can utilize this information to develop pricing models based on price per square foot, time adjustment models, and comparable sale models. The inclusion of square footage data enhances the precision of AVMs’ property valuations, benefiting both homebuyers and AVM companies.
9. Open Registry Data: Accelerating Innovation in Property Valuation
The UK’s open and accessible registry data has accelerated innovation in property valuation. This open data environment fosters collaboration and drives better accuracy across the board. While open registry data may not be feasible in Canada, there is an opportunity to create accelerators that promote innovation in property valuation. These accelerators can facilitate the development of more accurate AVMs, benefiting the Canadian market.
10. The Global Landscape: Insights for the Canadian Market
The global landscape, particularly the UK market, offers valuable insights that can shape the future of AVMs in Canada. By studying successful implementations and advancements in other markets, Canadian stakeholders can learn from best practices and adapt them to their specific needs. The next generation of AVMs in Canada can benefit from the lessons learned and innovations introduced in the UK and other global markets.
In conclusion, the future of Automated Valuation Models (AVMs) is bright. The next generation of AVMs harnesses advanced technology, leverages data partnerships, and incorporates innovative solutions like photo-based AI. By embracing new data capabilities and learning from global markets, AVMs in Canada can provide more accurate, efficient, and reliable property valuations. The combination of technological advancements and industry collaborations paves the way for a future where AVMs play a pivotal role in the real estate industry.