Practice briefing – Automated valuation models (AVMs): their role, their advantages and their limitations
| DOI | https://doi.org/10.1108/JPIF-07-2020-0086 |
| Published date | 29 September 2020 |
| Date | 29 September 2020 |
| Pages | 481-491 |
| Subject Matter | Property management & built environment,Real estate & property,Property valuation & finance |
| Author | Brano Glumac,François Des Rosiers |
Practice Briefing
Practice briefing –Automated
valuation models (AVMs): their
role, their advantages and
their limitations
Brano Glumac
Urban Development and Mobility Department,
Luxembourg Institute of Socio-Economic Research,
Esch-sur-Alzette, Luxembourg, and
François Des Rosiers
Finance, Insurance and Real Estate Department, Laval University, Quebec, Canada
Abstract
Purpose–The current state-of-the-artrecognises three traditional valuation approaches. The cur rent division is not
sufficientto explain systematicallyall features t hatdrive the dev elopment andusage of automatedvaluationmodels.
Design/methodology/approach –This practice briefing reviews existing valuation approaches, their pros
and cons and more critical other automated valuation aspects or features; both based on a literature review.
Findings –This paper discusses and lists the six critical aspectsor features, besides the valuation approaches.
Practical implications –This paper reveals the list of aspects or features that are important to consider
when designing an automated valuation model.
Originality/value –This practice briefing discusses the inclusion of a multitude of aspects when considering
an automated valuation model design.
Keywords Valuation approach, Automated valuation model, Features
Paper type General review
1. Introduction
Today, the traditional and predominant valuation approaches (e.g. French and Gabrielli,
2018;Pagourtzi et al., 2003) do not necessarily meet all emerging trends in property
technology. In a technical sense, the traditional valuation approaches do not fully facilitate
the design process of an automated valuation model –AVM (Schulz et al., 2014). Also, the
traditional valuation approaches do not include all essential features that should be taken into
consideration when analysing the usage of AVMs. Also, an interest in AVMs has been
recognised in many disciplines, such as architecture, engineering, law and economics.
Although notions of AVMs might appear differently to sch olars, practitioners and
policymakers in different disciplines, there is also a need for a more holistic approach.
Intrinsically, this literature review reflects the needs of all disciplines, which implies the
inclusion of many aspects or features. In parallel and a priori, the list of features should
include both technical and usage-related features.
Authors looked at the many vital aspects of AVMs that goes beyond the three traditional
valuation approaches. In the previous practice briefings, Gleißner and Oertel (2020) provide a
new conceptual framework for the real estate transactions. Scholars have also reviewed the
literature (D’Amato and Kauko, 2017), made attempts to classify existing AVM knowledge
(Jahanshiri et al., 2011) and formalised its development process (Schulz et al., 2014). However,
Practice briefing
–Automated
valuation
models
481
This paper forms part of a special section “Practice Briefing”.
The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/1463-578X.htm
Received 30 July 2020
Revised 3 August 2020
Accepted 3 August 2020
Journal of Property Investment &
Finance
Vol. 39 No. 5, 2021
pp. 481-491
© Emerald Publishing Limited
1463-578X
DOI 10.1108/JPIF-07-2020-0086
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