For more than 12 years we’ve been testing AVMs and watching them improve over time. More model builders have developed better techniques, and with the falling cost of processing and storage, and with the improving availability of data, AVMs just continue to get better and better.
We aren’t the only ones noticing. We recently read with pleasure Craig Gilbert’s observations of the same phenomenon (Craig is an expert appraiser and co-founder of RAC – Relocation Appraisers and Consultants).
Since co-developing the AVM for Veros in 1999+, I’ve been predicting that AVMs would eventually morph over from Mortgage Origination & Portfolio Valuations, the primary intended uses, into Relocation buyouts. The question has been “when”, not “if”. Relocation represents a microcosm sub-market of the overall residential appraisal business – maybe 5% of the total?
Back in the early days, AVMs were not as accurate as they are today. This has changed. I was thinking about this very thing this morning before opening the current issue of Mobility Magazine, and there it was. The time has arrived.
Read Mobility Magazine December 2018 article “TECHNOLOGY TODAY – What’s Hot for Mobility” written by Steven M. John and Mary-Grace Ellington of HomeServices Relocation.
Here are a few excerpts from the article:
– Recent experiments to test reliability of AVMs show the results to be comparable to formal, in-person appraisals.”
– These valuation tools can save significant time and money while offering convenience.”
– A typical FAVM can be obtained for a fraction of the cost of a traditional appraisal.” [“F” = Forecasting]
– Target values are not fed into the models, and they are not subject to obvious human bias, so theirs perceived impartiality”
– Fidelity Residential Solutions has been at the forefront of testing these new tools.”
Some of you may know Lee Kennedy, an Independent AVM Expert, of AVMetrics, started by Lee in 2005. Lee is a really great guy, has been an appraiser since the mid-80’s, has testified as an expert witness on cases involving use of AVMs and the Financial Crisis and has spoken at recent A.I. Symposium. He’s like the AVM gate-keeper. In his blog titled “The Wild, Wild West of Automated Valuations”, there is a graph showing that the mean absolute error of tested AVMs decreased from 14.7% in 2009 to 5.8% in 2017 and 2018. This is for all AVMs in entire U.S.. Some of course are more accurate than a +-5.7% error rate, when drilling down to specific neighborhoods and AVMs, on a case-by-case basis.