Author: Vanessa Mitchell. This article first appeared in the Australian Property Investor Magazine.
Vanessa Mitchell chats to CoreLogic’s Global CEO, Lisa Claes, about AVMs, the future of valuation, and why valuers will never be out of a job. In a time of severe disruption for valuers, it would be easy to think AI, or automated valuation models (AVMs), will replace valuers altogether.
But this is categorically the case, according to Lisa Claes, global CEO of CoreLogic. While AVMs will automate certain aspects of valuation, like data collation and interpretation, human subjectivity cannot be replaced by AI, she says. It has been a busy time for CoreLogic over the past year, not only due to the development of new AVMs and real estate products, but also due to data privacy changes around the world.
“We’ve been very busy launching our valuation transformation strategy into the market, and deepening our functionality in our real estate suite of products,” Ms. Claes says.
“Of course, there’s been enormous digitalisation and automation in every industry and everyone is feeling this change. But one characteristic that endures is that humans need humans, so in spite of automation, AI and technology, there’s still going to be a need for the application of human wisdom and intelligence.”
Nowhere is this more apparent that in valuation, an inherently subjective and emotional process, a process which AI cannot, as yet, replicate. “I do think there will be increased adoption in the future by AVMs, but I don’t believe valuations will become the exclusive purview of AVMs,” Ms. Claes explains.
“What will happen, is there will be a closer a symbiosis between AVMs and human valuers, and between man, machine, and robots. The human will be orchestrating and conducting the automation, and the AI input into the AVMs, to make sure a better result is delivered to the customer. The valuer will be able to harness the benefits of AVMs and AI to streamline and value-add to their valuations.
“What are AVMs really good at? They are good at assimilating large volumes of price information and using it to assess value and market risk. But what valuers are good at is the subjective or the esoteric, and the uniqueness of property, and predicting evolving customer appetites. “So, it’s a very critical complexion of value when it comes to property that a human has to perform, but now, a human can do so with the grunt work being done by the AVMs. They are both a critical part of an assessment process, and it will depend on what the valuation purpose is. If it’s a straightforward valuation with low risk on a vanilla property, that might be a great case for an AVM valuation.
“Those properties are in the minority, however. The other end of the spectrum is with an usual property or delving into attributes that customers might find attract/unattractive with that property at a particular point in time. In this case, then human subjectivity is needed.
“Twenty years ago attributes, like being near a bus stop for example, now considered attractive, would have been considered a real negative back then. The human valuer can see what the customer appetites are today. A machine can’t get into the human psychology around that, and won’t be able to for a long time, if ever. “I personally believe AVMs should be embraced by valuers, they take out the grunt work on data collection and interpretation. Now, there is so much more data available to the valuer, and a sole valuer simply can’t process it all quickly enough to push out the volumes required by banks. This is where the AVMs will help.”
To this end, CoreLogic developed IntelliVal in New Zealand, and is hoping to soon launch it in Australia. The AVM aims to enable an instant estimation of a property’s value, based on comparable recent sales, rating valuations, local listings and other data. Testing shows 72 per cent of estimated values measure within 10 per cent of the sales price.
“IntelliVal is an ensemble model. It is a cluster of multiple AVMs in a single AVM. It allows the valuer to modulise it based on what they need, with the ability to get really granular, and pick and choose the sub-AVMs used. We built it for a pilot to be able to choose the navigation and instruments to customise their valuations as needed,” she says. Along with AVMs, Ms. Claes says the Royal Banking Commission will also impact property professionals into the future.
“There are tectonic changes to regulatory landscapes that won’t be confined to the back office of financial institutions. They are going to change the membranes of organisations and the way customers interact with organisations. “Open banking is going to increase the value of data currency, in the sense that customers own that data and it gives the power to the customers to direct where and what they want done with it. That will have enormous business benefits and opportunities for those who use the data to bespoke solutions for customers.
“We are very much involved with the government on this; clearly we are a custodian of data, and we’re very much looking to help our customers use that data to their benefit.
“Moving forward, part of our valuation transformation strategy is to enable more efficient workflow platforms and enable banks to manage critical valuations services, while also enabling valuers to access the best of our research capability, helping valuers to value property today but also look back at the pedigree of the valuations of the property, to look at data and broader research, and to integrate with an existing portfolio.
“At the high level the direction is platforms, data utilisation, greater use of data to speed decision making, in order to drive growth and better manage risk.”