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Data & Technology

Automated Valuation Models: the technology is racing ahead – can we keep up?

Automated Valuation Models (AVMs) have been around for a while, but they look set to step into another gear over the next decade as the technology becomes more sophisticated and ambitious. Is this a good thing, or a threat to the quality of valuations?

Oliver Parsons, Editor, Modus
22 May 2019

Automated Valuation Models (AVMs) have been around for a while, but they look set to step into another gear over the next decade as the technology becomes more sophisticated and ambitious. Is this a good thing, or a threat to the quality of valuations?

For Therese Rutherford, Managing Director – Head of CIB Appraisal at JP Morgan Chase, it’s mostly the former.

She set out her viewpoint at the RICS World Built Environment Forum Summit 2019 in New York, as part of a panel discussing the future of AVMs: I'm excited about the whole idea of capturing this data and making our world more efficient. I think it's time for us to really add value in this process – and let the technology deal with the inefficiencies of our world.”

With the technology itself racing ahead, the panel agreed that the onus is on the profession, the industry and government to keep up, and ensure AVMs are used in a responsible, effective way.

Wayne R. Miller, Senior Vice President - Chief Appraiser at Bank of America, believes that it’s still early days – and that our assessment of AVMs will not be complete until we’ve seen them at work in both good times and bad times.

I don't know where we're going to be in 10 years. A lot of these [technological] developments have occurred during a time when we've been in a steady market.

Wayne R. Miller
Senior Vice President - Chief Appraiser at Bank of America

He goes on to paint a scenario in which a Global Financial Crisis-style economic event has hit asset values: how will public opinion weigh on the use of automated technology in the run up to such a financial crash?

However, it's critical to consider the technology as much more than a way of speeding up valuations. This was a view crystallised by Cate Agnew, Head of Valuation – Executive Director at Natixis Corporate & Investment Banking: "I would hope that the data analytics that are brought into play in an automated valuation model will be able to moderate those ever upward spikes that we see before we fall off the cliff."

By making it possible to process and analyse new levels of data complexity, AVMs could open the door to a more resilient, predictive conception of value – turning valuation from a moment-in-time snapshot into a '3D' digital model of future asset value – but only if the profession, government and the wider industry find a way to make it happen.