Automated Valuation Models A Variety of Projects in

Automated Valuation Models: A Variety of Projects in Research and Industry ERES Annual Conference, Delft Andreas Kindt M. Sc. / PD Dr. habil. Steffen Metzner Bauhaus-Universität Weimar ERES 2017

Automated Valuation Models - A Variety of Projects in Research and Industry Content 1. Non-transparancy and heterogeneity of AVM: The problem of various terms, definitions and fields of use 2. Systematization of AVM: A literature-based approach 3. Method related Perspective 4. Process related Perspective 5. Property related Perspective 6. User related Perspective 7. Country related Perspective 8. Conclusion 2 ERES 2017 A. Kindt / S. Metzner | andreas. kindt@uni-weimar. de | Bauhaus-Universität Weimar | Real Estate Economics | www. immo-oek. de

Automated Valuation Models - A Variety of Projects in Research and Industry Non-transparancy and heterogeneity of AVM: The problem of various terms, definitions and fields of use 3 ERES 2017 A. Kindt / S. Metzner | andreas. kindt@uni-weimar. de | Bauhaus-Universität Weimar | Real Estate Economics | www. immo-oek. de

Automated Valuation Models - A Variety of Projects in Research and Industry Content 1. Non-transparancy and heterogeneity of AVM: The problem of various terms, definitions and fields of use 2. Systematization of AVM: A literature-based approach 3. Method related Perspective 4. Process related Perspective 5. Property related Perspective 6. User related Perspective 7. Country related Perspective 8. Conclusion 4 ERES 2017 A. Kindt / S. Metzner | andreas. kindt@uni-weimar. de | Bauhaus-Universität Weimar | Real Estate Economics | www. immo-oek. de

Automated Valuation Models - A Variety of Projects in Research and Industry A number of 6 top-level-perspectives are considered in the AVM systematization approach Scale of Valuation Contries AVM Systematization (Perspectives) User 5 ERES 2017 Valuation Methods Application Fields Property Type A. Kindt / S. Metzner | andreas. kindt@uni-weimar. de | Bauhaus-Universität Weimar | Real Estate Economics | www. immo-oek. de

Automated Valuation Models - A Variety of Projects in Research and Industry 67 relevant sources were analyzed and used for the AVM systematization approach Used Literature Academia 2001 2017 Teaching Material 20 CAMA 35 2001 2017 Portfolio Valuation 6 2008 2017 Batch Valuation 3 2017 Subject Number of Sources Research Paper Monographs 1998 2017 Mass Appraisal Valuation Guidelines 51 AVM Standards White Paper Practice Time period of sources Number of Sources Subject Time period of sources Main perspective of the Dissertation 6 ERES 2017 A. Kindt / S. Metzner | andreas. kindt@uni-weimar. de | Bauhaus-Universität Weimar | Real Estate Economics | www. immo-oek. de

Automated Valuation Models - A Variety of Projects in Research and Industry Literature-based approach: An example of 20 relevant sources 7 ERES 2017 A. Kindt / S. Metzner | andreas. kindt@uni-weimar. de | Bauhaus-Universität Weimar | Real Estate Economics | www. immo-oek. de

Automated Valuation Models - A Variety of Projects in Research and Industry Content 1. Non-transparancy and heterogeneity of AVM: The problem of various terms, definitions and fields of use 2. Systematization of AVM: A literature-based approach 3. Method related Perspective 4. Process related Perspective 5. Property related Perspective 6. User related Perspective 7. Country related Perspective 8. Conclusion 8 ERES 2017 A. Kindt / S. Metzner | andreas. kindt@uni-weimar. de | Bauhaus-Universität Weimar | Real Estate Economics | www. immo-oek. de

Automated Valuation Models - A Variety of Projects in Research and Industry AVMs are used in valuation processes with different scales: From single valuations to large-scale valuations 9 ERES 2017 A. Kindt / S. Metzner | andreas. kindt@uni-weimar. de | Bauhaus-Universität Weimar | Real Estate Economics | www. immo-oek. de

Automated Valuation Models - A Variety of Projects in Research and Industry 4 general types of modelling are used within the model specification 10 ERES 2017 A. Kindt / S. Metzner | andreas. kindt@uni-weimar. de | Bauhaus-Universität Weimar | Real Estate Economics | www. immo-oek. de

Automated Valuation Models - A Variety of Projects in Research and Industry Hedonic models continue to be the most common basis for AVM 11 ERES 2017 A. Kindt / S. Metzner | andreas. kindt@uni-weimar. de | Bauhaus-Universität Weimar | Real Estate Economics | www. immo-oek. de

Automated Valuation Models - A Variety of Projects in Research and Industry Nearly 50 different calibration methods are mentioned in the relevant literature 12 ERES 2017 A. Kindt / S. Metzner | andreas. kindt@uni-weimar. de | Bauhaus-Universität Weimar | Real Estate Economics | www. immo-oek. de

Automated Valuation Models - A Variety of Projects in Research and Industry Nearly 50 different calibration methods are mentioned in the relevant literature 13 ERES 2017 A. Kindt / S. Metzner | andreas. kindt@uni-weimar. de | Bauhaus-Universität Weimar | Real Estate Economics | www. immo-oek. de

Automated Valuation Models - A Variety of Projects in Research and Industry The MRA continues to be the main calibration instrument in an AVM development 14 ERES 2017 A. Kindt / S. Metzner | andreas. kindt@uni-weimar. de | Bauhaus-Universität Weimar | Real Estate Economics | www. immo-oek. de

Automated Valuation Models - A Variety of Projects in Research and Industry A multi-dimensional AVM toolbox can be derived from the empirical analysis AVM model specification Sales Comparison Approach Cost Approach Income Approach Hedonic Price Theory / Methods model calibration Established /Traditional Methods Time Series Analysis Hedonic Modells Other Estab. Methods MRA 15 ERES 2017 Alterntive / Innovative Methods Emerging Methods ANN Modelling Spatial Effects Hybrid Systems A. Kindt / S. Metzner | andreas. kindt@uni-weimar. de | Bauhaus-Universität Weimar | Real Estate Economics | www. immo-oek. de

Automated Valuation Models - A Variety of Projects in Research and Industry Content 1. Non-transparancy and heterogeneity of AVM: The problem of various terms, definitions and fields of use 2. Systematization of AVM: A literature-based approach 3. Method related Perspective 4. Process related Perspective 5. Property related Perspective 6. User related Perspective 7. Country related Perspective 8. Conclusion 16 ERES 2017 A. Kindt / S. Metzner | andreas. kindt@uni-weimar. de | Bauhaus-Universität Weimar | Real Estate Economics | www. immo-oek. de

Automated Valuation Models - A Variety of Projects in Research and Industry 76 Application fields and cases could be identified 17 ERES 2017 A. Kindt / S. Metzner | andreas. kindt@uni-weimar. de | Bauhaus-Universität Weimar | Real Estate Economics | www. immo-oek. de

Automated Valuation Models - A Variety of Projects in Research and Industry AVM supports core processes of real estate management Transaction Other REAM Purposes Appraisal process redesign Financing AVM: Process related Perspective Insurance Accounting Taxation Audit 18 ERES 2017 A. Kindt / S. Metzner | andreas. kindt@uni-weimar. de | Bauhaus-Universität Weimar | Real Estate Economics | www. immo-oek. de

Automated Valuation Models - A Variety of Projects in Research and Industry AVM most commonly used within core process „Financing“ 19 ERES 2017 A. Kindt / S. Metzner | andreas. kindt@uni-weimar. de | Bauhaus-Universität Weimar | Real Estate Economics | www. immo-oek. de

Automated Valuation Models - A Variety of Projects in Research and Industry More detailed breakdown of core processes (5 levels) 20 ERES 2017 A. Kindt / S. Metzner | andreas. kindt@uni-weimar. de | Bauhaus-Universität Weimar | Real Estate Economics | www. immo-oek. de

Automated Valuation Models - A Variety of Projects in Research and Industry 7 out of 10 most common use cases are related to core process „Finance“ 21 ERES 2017 A. Kindt / S. Metzner | andreas. kindt@uni-weimar. de | Bauhaus-Universität Weimar | Real Estate Economics | www. immo-oek. de

Automated Valuation Models - A Variety of Projects in Research and Industry Content 1. Non-transparancy and heterogeneity of AVM: The problem of various terms, definitions and fields of use 2. Systematization of AVM: A literature-based approach 3. Method related Perspective 4. Process related Perspective 5. Property related Perspective 6. User related Perspective 7. Country related Perspective 8. Conclusion 22 ERES 2017 A. Kindt / S. Metzner | andreas. kindt@uni-weimar. de | Bauhaus-Universität Weimar | Real Estate Economics | www. immo-oek. de

Automated Valuation Models - A Variety of Projects in Research and Industry AVMs are currently primarily developed and used for residential properties / portfolios 23 ERES 2017 A. Kindt / S. Metzner | andreas. kindt@uni-weimar. de | Bauhaus-Universität Weimar | Real Estate Economics | www. immo-oek. de

Automated Valuation Models - A Variety of Projects in Research and Industry Content 1. Non-transparancy and heterogeneity of AVM: The problem of various terms, definitions and fields of use 2. Systematization of AVM: A literature-based approach 3. Method related Perspective 4. Process related Perspective 5. Property related Perspective 6. User related Perspective 7. Country related Perspective 8. Conclusion 24 ERES 2017 A. Kindt / S. Metzner | andreas. kindt@uni-weimar. de | Bauhaus-Universität Weimar | Real Estate Economics | www. immo-oek. de

Automated Valuation Models - A Variety of Projects in Research and Industry 35 potential users were assigned to the identified application fields 25 ERES 2017 A. Kindt / S. Metzner | andreas. kindt@uni-weimar. de | Bauhaus-Universität Weimar | Real Estate Economics | www. immo-oek. de

Automated Valuation Models - A Variety of Projects in Research and Industry AVM Systematization – User 26 ERES 2017 A. Kindt / S. Metzner | andreas. kindt@uni-weimar. de | Bauhaus-Universität Weimar | Real Estate Economics | www. immo-oek. de

Automated Valuation Models - A Variety of Projects in Research and Industry AVM Systematization – User 27 ERES 2017 A. Kindt / S. Metzner | andreas. kindt@uni-weimar. de | Bauhaus-Universität Weimar | Real Estate Economics | www. immo-oek. de

Automated Valuation Models - A Variety of Projects in Research and Industry Content 1. Non-transparancy and heterogeneity of AVM: The problem of various terms, definitions and fields of use 2. Systematization of AVM: A literature-based approach 3. Method related Perspective 4. Process related Perspective 5. Property related Perspective 6. User related Perspective 7. Country related Perspective 8. Conclusion 28 ERES 2017 A. Kindt / S. Metzner | andreas. kindt@uni-weimar. de | Bauhaus-Universität Weimar | Real Estate Economics | www. immo-oek. de

Automated Valuation Models - A Variety of Projects in Research and Industry In total 26 countries from five continents are using AVM for different purposes 29 ERES 2017 A. Kindt / S. Metzner | andreas. kindt@uni-weimar. de | Bauhaus-Universität Weimar | Real Estate Economics | www. immo-oek. de

Automated Valuation Models - A Variety of Projects in Research and Industry Within the US, more than 50% of all identified AVM applications are documented 30 ERES 2017 A. Kindt / S. Metzner | andreas. kindt@uni-weimar. de | Bauhaus-Universität Weimar | Real Estate Economics | www. immo-oek. de

Automated Valuation Models - A Variety of Projects in Research and Industry All countries with the most applications use AVM for audit 31 ERES 2017 A. Kindt / S. Metzner | andreas. kindt@uni-weimar. de | Bauhaus-Universität Weimar | Real Estate Economics | www. immo-oek. de

Automated Valuation Models - A Variety of Projects in Research and Industry Content 1. Non-transparancy and heterogeneity of AVM: The problem of various terms, definitions and fields of use 2. Systematization of AVM: A literature-based approach 3. Method related Perspective 4. Process related Perspective 5. Property related Perspective 6. User related Perspective 7. Country related Perspective 8. Conclusion 32 ERES 2017 A. Kindt / S. Metzner | andreas. kindt@uni-weimar. de | Bauhaus-Universität Weimar | Real Estate Economics | www. immo-oek. de

Automated Valuation Models - A Variety of Projects in Research and Industry Conclusion - AVM Results - Methods: - The HPT / regression continues to be the central model of AVMs. - The current research develops and tests innovative, more flexible methods and combines existing methods to hybrid model solutions. - Scale: - AVM valuations range from the individual valuation over batch/portfolio valuations to mass appraisal - Application fields: - 76 different application cases were identified and could be assigned to 8 higher-level application fields. - The current focus of the AVM application is still on the field of "Financing" and "Audit“ - Property Types: - AVMs are currently mainly developed and applied for residential real estate purposes. - Especially in the field of commercial and special properties, there are just very few documented projects - User: - 35 potential users were identified and assigned for the identified application purposes. - The catalog of users is not exhaustive. Further users are possible. - Countries: - In total 26 countries from five continents use AVM for different purposes. - There is a need for research, in particular, for countries which have a much lower market transparency and have not enough data for the conventional modeling process. 33 ERES 2017 A. Kindt / S. Metzner | andreas. kindt@uni-weimar. de | Bauhaus-Universität Weimar | Real Estate Economics | www. immo-oek. de

Automated Valuation Models - A Variety of Projects in Research and Industry Thank you for your attention! 34 ERES 2017 A. Kindt / S. Metzner | andreas. kindt@uni-weimar. de | Bauhaus-Universität Weimar | Real Estate Economics | www. immo-oek. de

Automated Valuation Models - A Variety of Projects in Research and Industry Contact Bauhaus-Universität Weimar Department: Real Estate Economics Marienstraße 7 a D-99423 Weimar Ph. D-Student: Andreas Kindt M. Sc. Telefon: +49 (0)3643 584383 Email: andreas. kindt@uni-weimar. de Supervisor: PD Dr. habil. Steffen Metzner MRICS Telefon: +49 (0)3643 584384 Email: steffen. metzner@uni-weimar. de Internet: www. immo-oek. de 35 ERES 2017 A. Kindt / S. Metzner | andreas. kindt@uni-weimar. de | Bauhaus-Universität Weimar | Real Estate Economics | www. immo-oek. de