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22 NOV 2018

Automated Valuation Models – which future?

Sander-Scheurwater-RICS

Sander Scheurwater

Director Corporate Affairs, Europe

Brussels, Belgium

RICS

In 2017, RICS published a paper on the Future of Valuations, where we looked at current trends in technological development and client expectations, and described what a future valuation process could look like. Discussions around this report indicated a need to look at developments of Automated Valuations Models (AVMs) in more detail.

AVMs are going through rapid developments. Whether used as a tool by valuers or a standalone product, there is a need for better understanding the opportunities and risks associated with AVMs, and the role RICS can play as a public interest organisation, setting and enforcing standards.

At the end of October 2018, we had a Leaders Forum in the Netherlands, where we had representatives from the AVM sector, ‘traditional’ valuers and banks discussing these questions.

AVMs already have their use for certain property types and certain valuation purposes, mainly in the residential sector. However, with current technogical developments (big data, AI), there is no doubt their usefulness will expand.

Three main points surfaced from the discussion: liability, data and the need to understand the inner working.

  1. A valuer will continue to be needed for the majority of valuations, but their role in the valuation process will be different, and smaller, than it is today. In this case, the AVM will be a tool. In other cases, the AVM can and will operate as a standalone product. In both instances, there are (different) questions around liability.
  2. It’s all about data. Quality, availability and transparency are not yet where they should be. Data is not shared sufficiently, sometimes for commercial reasons, sometimes for legislative reasons. The sector should engage with decision makers on this point.
  3. Understanding the inner workings of an AVM is important. An algorithm-based AVM can be explained, but with deep learning or Neuro-Linguistic Programming (NLP) this will be more challenging.

For these three issues (liability, data and the need to understand the internal process) it was mentioned that these can be equally challenging for human valuers as they are for AVMs.

RICS will continue the discussion, with a specific emphasis on the usefulness of a global standard to create clarity and consistency around AVMs, whilst keeping in mind local needs as required by custom, practice and jurisdictional requirements.

Sander-Scheurwater-RICS

Sander Scheurwater

Director Corporate Affairs, Europe

Brussels, Belgium

RICS

Sander Scheurwater leads the Corporate Affairs for Europe team, which aims to inspire trust and confidence in real estate and construction markets, as well as provide expert advice to decision makers and markets, focusing on policy, brand development, thought leadership, media and communication and market adoption of our standards and our qualification.

Sander is a Dutch national and studied economics at the Erasmus University of Rotterdam. He majored in sociological economics.
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