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RESEARCH PRODUCT

An Estimative Model of Automated Valuation Method in Italy

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The Automated Valuation Method (AVM) is a computer software program that analyzes data using an automated process. It is related to the process of appraising an universe of real estate properties, using common data and standard appraisal methodologies. Generally, the AVM is based on quantitative models (statistical, mathematical, econometric, etc.), related to the valuation of the properties gathered in homogeneous groups (by use and location) for which are collected samples of market data. The real estate data are collected regularly and systematically. Within the AVM, the proposed valuation scheme is an uniequational model to value properties in terms of widespread availability of sample data, allowing the use of statistical models, and in the opposite conditions of the absence of data of comparable properties. Under these conditions the ‘appraisal model’ has a unique shape, when its coefficients are calculated with a mathematical-statistical model and when they are determined by an estimative process. The main part of the appraisal model is unique and the universal in the valuation, for which the mathematical-statistical and estimative procedures are the underlying part. Of course, the accuracy of the valuation increases with the number of available data, other conditions being equal, and the valuations, carried out in the absence of data (but in the presence of other market information), require extra-statistical appraisal procedures involving a complete knowledge of the real estate market (Ciuna and Simonotti 2011). However such knowledge is also required in the AVM performed by quantitative models with regard to the data sampling and the verify of the results (Kauko, T., & d’Amato, M. 2008a & b). The appraisal model is based on uniequational ‘appraisal functions’, on indices measured in the market and on tests. In first approximation, the linear form is preferred for simplicity, for the modularity (the majority of models are linear or linearized or attributable to additive forms), for the understanding of the calculations, the intermediate elements (e.g. marginal prices of the real estate characteristics) and the results of the valuation.