To give you a deeper understanding of this advanced, yet accessible, technology for assisting you in your property evaluation process, we review the inner workings of our Automated Valuation Model (AVM).
So what precisely is an Automated Valuation Model?
In short - an AVM is a tool based on a statistical calculation which takes trends and factors affecting the property market into consideration, with the express purpose of determining the current market value of a property.
How does it determine a predicted value?
There are a couple of processes the model needs to go through to in order to determine the predicted value. This process is called modelling and is outlined briefly below.
1. Segmenting the market:
First we break South Africa down into smaller, more comparable components by area and price. This is important as it is known that the smaller the area being looked at, the more similar the properties will become in terms of price bands. Furthermore, properties in different price bands have different growth rates and those in the same price band grow at more or less the same rate.
2. Determine growth rates:
By examining repeat sales within the segments we determine an average change in sale price over time. We pay careful attention to ensure that any data that is too far removed from the "norm" is removed - preserving the model's accuracy.
3. Fine tune for influencing factors:
These rates are then further adjusted to take macro-economic indicators such as interest rates and CPI that directly affect property price and sales.
4. Valuating a property:
The result of the above complex calculation is a predicted current market value for the property investigated. Our predicted value will always be backed by a confidence rating as well as upper and lower bounds that the calculation predicts the property may fetch. The confidence rating indicates how certain the model prediction is that the property will sell within 10% of the predicted value.
Why use AVM?
AVM results are based on reliable, current property data and free of bias or emotion. That is not to say that your expertise and experience fall to the way side. On the contrary! By showing your clients that you harness sophisticated technology and are able to effectively and accurately price property, you are entrenching credibility and trust.
How do I get a predicted price on a property?
If you haven't already activated your AVM module - don't delay! Quickly drop us a line and your sales consultant will be in contact to get you up and running in no time!
If you've already activated AVM then go forth and valuate! The AVM option is found on the CAV tab. Make sure you select the "include predicted price" check box and the result will then appear in your CAV report.