Automated valuation models (AVMs): How real estate professionals benefit from them

In today’s fast-paced property market, automated valuation models (AVMs) are revolutionising property valuation with remarkable speed and efficiency. These cutting-edge solutions reduce the need for traditional, time-consuming physical appraisals, enabling quicker decisions and smoother transactions. While AVMs offer significant advantages, they are best suited to specific scenarios. So, what makes AVMs so impactful, how do they work, and who stands to gain the most from their use in the property value chain?

What is an automated valuation model?

Automated valuation models are computer-based systems that estimate the value of a property through mathematical modelling. These models utilise various data points, including recent sales of similar properties/comparable properties, property characteristics of the subject property (such as size, age, and location), market trends, and sometimes neighbourhood-specific data in order to provide valuation estimates. An AVM uses information from diverse sources, including public records and geographic data, to provide real-time and cost-effective property value estimates.

AVM providers build solutions that play an essential role in financial institutions' decision-making, particularly in loan origination and monitoring. They are critical for mortgage lenders, especially for underwriting processes, home equity loan assessments, and credit risk management and risk mitigation. By delivering precise and reliable property valuations, AVMs enable lenders to make more informed, lower-risk lending decisions, ultimately offering borrowers a more pleasant experience and ensuring optimal processing of mortgage applications. AVMs also serve as valuable solutions for insurance companies, allowing them to effectively detect and reduce risks in insurance underwriting.

Beyond serving as a valuable solution for financial institutions and insurance companies, they also play an essential role in portfolio analysis and management processes for investors. These solutions enable stakeholders to gain a deeper understanding of their portfolio's value, optimise investment strategies, make more informed decisions, and ultimately enhance overall returns. Stakeholders such as developers and build-to-rent (BTR) operators can also leverage AVMs and detailed insights to identify opportunities, understand market trends, analyse plots and reach their financial goals.

Real estate agents and advisors leverage AVMs to accurately determine appropriate sale prices and consult end customers. Last but not least, although homeowners and homebuyers may not interact with AVMs directly, they benefit from the precise market value estimates provided by professionals who rely on these tools. This ensures that they receive fair and accurate pricing information, whether buying or selling a property.

What are the advantages of automated valuation models?

Automated valuation models offer several key advantages, reflecting the broader benefits of automation. First, they save time by quickly performing complex calculations and comparisons, thus streamlining the valuation process. Second, they help reduce costs by minimising the need for manual labour and extensive data collection. AVMs also scale efficiently, managing large volumes of property valuations without significantly increasing resources or operational costs. They also help lower the risk of human error or misconduct by eliminating bias and subjectivity, reducing the potential for fraud or mispricing.

However, while AVMs can often reduce the necessity for physical, ‌traditional appraisals, this is not always the case. Depending on the property's unique characteristics, the available data, or the regulatory requirements, a physical inspection may still be required.

How PriceHubble’s advanced AVM leverages big data and AI to provide the most accurate valuations

At PriceHubble, our proprietary algorithms underpin one of the most advanced automated valuation models available in the real estate market. By leveraging big data and AI, we collect, organise, and analyse extensive datasets related to residential real estate, establishing one of the most comprehensive databases in the real estate industry, with unmatched depth in the countries where we operate. Our AVM is the foundation of our technology, driving all our products and enabling precise residential property valuations.

Ensuring compliant property valuations through rigorous audits

Because accuracy and transparency are a necessity in the financial and real estate sectors, our commitment extends beyond technology. We understand that in an industry where precision and regulatory compliance are paramount, the integrity of our AVM must be continually validated. This is why we subjected our desktop valuation solution to an external audit conducted by a Big 4 firm. This audit, which focused on adherence to the European Banking Authority (EBA) Guidelines for Loan Origination and Monitoring (GLOM), evaluated the robustness of our statistical models, methodologies, documentation, development processes, and controls.

The successful completion of this audit reaffirms our dedication to delivering solutions that adhere to the highest regulatory standards and are compliant for use by internal and external valuers for loan origination and monitoring.

The future of property valuation with AVMs

As the property market continues to evolve, the role of automated valuation models will become increasingly critical. AVMs provide a faster, more cost-effective alternative to traditional appraisal methods and offer enhanced accuracy and consistency. For real estate professionals such as lenders, insurance companies, investors and agents as well as for homeowners, AVMs represent a powerful solution that can drive better decision-making and improve overall outcomes.

As the industry moves forward, those who adopt new technologies and advanced valuation models will be better positioned to thrive in a competitive and data-driven market. At PriceHubble, we remain committed to pushing the boundaries of what AVMs can achieve, continually refining our technology to meet the growing needs of the real estate and financial sectors.

Do you want to learn more about our property valuations powered by big data and AI? Don’t hesitate to talk to our experts: