Thursday, December 14, 2017

How Automated Valuation Modeling (AVM) Helps Assessment Rolls and Mortgage Portfolios

(Click on the image to enlarge)

When a Market AVM is developed using the recent arms-length sales, it generates an econometric solution (blue graph).

As the model gets further fine-tuned (requires 2-to-3 iterative cycles involving correction of residuals and removal of outliers, which are not shown here), the model R-squared tends to approach .90 and the COD/COV falls below 10, thus convincing technicians to apply the model on to the assessment population in order to generate the assessment roll (or on to the mortgage portfolio to have it re-priced in line with the current market). 

Of course, it's always wise to test the final model on to a hold-out dataset (with very similar attributes the population dataset) before applying on to the actual population. This interim hold-out test helps identify and correct any model errors and inconsistencies, instead of having to discover and correct them post population application which is very time-consuming and cumbersome. Since this test must poduce very similar results as the model's as well as the population's, this is an excellent QA/SQC step as well.

Our Custom AVM Offerings:

1. Market AVM

2. Benchmark AVM

3. Office AVM

4. Auto Loan AVM

5. Sales Ratio Study

No comments:

Post a Comment