Recently the Singapore Institute of Surveyors and Valuers (SISV), an association of private valuation firms, declared that Automated Valuation Models (AVMs) are “not considered valuations (in accordance with the SISV Valuation Standards and Practice Guidelines)”.
What are AVMs? Where are they used? And, why should you care?
An AVM is a computer-generated valuation of a property that incorporates big data, algorithms, and best practice methodologies.
According to the International Association of Assessing Officers (IAAS), most developed countries employ AVMs, including US, Canada, Sweden, Germany, Australia, New Zealand and the United Kingdom.
For example, for more than 20 years, AVMs in the United States have been used by a wide array of industries for property tax assessment, financial accounting, fraud detection, loan origination, portfolio valuations, and bank audits.
In Australia, the Australian Prudential Regulation Authority (APRA) officially recognizes AVMs as valid valuation techniques in appropriate circumstances.
Tens of thousands of consumers, agents, and forward-thinking valuers in Singapore are using SRX Property’s X-Value as a starting point to price property, negotiate real estate deals, benchmark full valuations, and track the performance of their homes. Indeed, the number of requests for X-Value averages well over 100,000 per month in a low transaction property market.
AVMs, like X-ValueTM, offer consumers and professionals several benefits.
First, an AVM is completely transparent, as it documents the comparable transactions and methodology adjustments that went into calculating the single value. (Ask your agent for a free X-ValueTM report on your home and you will see all the supporting transactions and adjustments.)
Second, an AVM is neutral. The computer does not have a vested or commercial interest in the value of your home. Sometimes sellers don’t like the results of X-ValueTM because it is lower than they want. Other times buyers don’t like the results of X-ValueTM because it is higher than they want.
But, that is the point. AVMs take emotion and self-interest out of valuing a home and allow both sides of a real estate deal to have a fact-based discussion about the price of a home rather than fighting over “he said, she said”.
Finally, the market can measure and benchmark the results of an AVM. SRX Property published the performance testing of X-ValueTM in the whitepaper A Framework for an Efficient Property Market, which is available for your inspection at SRX.com.sg/SRX-valuations.
So why should you, as a property owner or potential buyer, care about AVMs?
AVMs provide a way to price, negotiate, and document the value of a property in a more transparent way than what has been previously available.
The definition of an efficient property market is one where “all pertinent information is available to all participants at the same time and where prices respond immediately to available information.” AVMs like X-ValueTM ensure that the same pricing information is available to consumers, real estate agents, valuers, banks, and policymakers. This, in turn, helps homeowners understand the value of their home and protect themselves when transacting. It helps agents better advise their clients. It helps banks better understand the risk in their property portfolios. All of this leads to a smarter property market and a more stable financial system.
Government and industry players are developing Singapore into a smart nation. AVMs make property smart. No nation is smart without smart property.
Jeremy Lee is Co-Founder and Chief Technology Officer of SRX Property. For more information and research on AVMs and efficient property markets, visit SRX.com.sg/SRX-valuations.
Finally, the market can measure and benchmark the results of an AVM. SRX Property published the performance testing of X-ValueTM in the whitepaper A Framework for an Efficient Property Market, which is available for your inspection at SRX.com.sg/SRX-valuations.
So why should you, as a property owner or potential buyer, care about AVMs?
AVMs provide a way to price, negotiate, and document the value of a property in a more transparent way than what has been previously available.
The definition of an efficient property market is one where “all pertinent information is available to all participants at the same time and where prices respond immediately to available information.” AVMs like X-ValueTM ensure that the same pricing information is available to consumers, real estate agents, valuers, banks, and policymakers. This, in turn, helps homeowners understand the value of their home and protect themselves when transacting. It helps agents better advise their clients. It helps banks better understand the risk in their property portfolios. All of this leads to a smarter property market and a more stable financial system.
Government and industry players are developing Singapore into a smart nation. AVMs make property smart. No nation is smart without smart property.
Jeremy Lee is Co-Founder and Chief Technology Officer of SRX Property. For more information and research on AVMs and efficient property markets, visit SRX.com.sg/SRX-valuations.