Steven John, CPA, SCRP, SGMS-T and Mary-Grace Ellington, CRP of HomeServices Relocation Report on What Technologies are Affecting the RMC Industry Today
Technology is an inescapable part of modern life. We live with technology at home, work, and school. We rely on technology improvements to make our lives better, while at the same time fearing that technology will replace us at work. The mobility industry is no different. So, what’s hot right now? Let’s look at a few specific technologies that are having a big impact in our industry today.
“As automated valuation models are further tested, we will see a shift to their increased use in lieu of or in addition to in-person appraisals.”
AUTOMATED VALUATION MODELS
Automated valuation models (AVMs) use a variety of data, including public records, property location, market conditions, and even Google images, in sophisticated algorithms to estimate the market value of real estate. They have been in use for several years in the underwriting process of home equity lending, portfolio and valuation risk monitoring, real estate marketing, and appraiser performance evaluation.
Forecasting automated value models (FAVMs) incorporate forecasting projections that make them especially appealing to relocation due to the industry’s need to project a value at the end of a specified marketing time. Initially, these valuation models could serve as a stand-in for an in-person appraisal when appraiser shortages, special properties, and tight turn times are in play. FAVMs could also be used as the third appraiser when appraisals are out of spread, or as a consistent second or supplement. FAVMs should include a forecast standard deviation, which acts as a confidence score, and the companies using them must determine the acceptable parameters. FAVMs are also gaining traction as a pre-marketing valuation tool, in addition to or in lieu of a second broker’s market analysis.
Recent experiments to test reliability of AVMs show the results to be comparable to formal, in-person appraisals. While not yet tested in court, 12 U.S. Code § 3354 defines and sets guidelines for use of AVMs in determining collateral values for mortgage lending. As AVMs are further tested, there will be more confidence in their valuation, and we will see a shift to their increased use in the mobility industry in lieu of or in addition to in-person appraisals.