An Estimative Model of Automated Valuation Method in Italy

The Automated Valuation Method (AVM) is a computer software pro-gram that analyzes data using an automated process. It is related to the process ofappraising an universe of real estate properties, using common data and standardappraisal methodologies. Generally, the AVM is based on quantitative models(statistical, mathematical, econometric, etc.), related to the valuation of the prop-erties gathered in homogeneous groups (by use and location) for which are col-lected samples of market data. The real estate data are collected regularly andsystematically. Within the AVM, the proposed valuation scheme is an uniequa-tional model to value properties in terms of widespread availability of sample data,allowing the use of statistical models, and in the opposite conditions of the absenceof data of comparable properties. Under these conditions the ‘ appraisal model ’ has aunique shape, when its coef fi cients are calculated with a mathematical-statisticalmodel and when they are determined by an estimative process. The main part of theappraisal model is unique and the universal in the valuation, for which themathematical-statistical and estimative procedures are the underlying part. Ofcourse, the accuracy of the valuation increases with the number of available data,other conditions being equal, and the valuations, carried out in the absence of data(but in the presence of other market information), require extra-statistical appraisalprocedures involving a complete knowledge of the real estate market (Ciuna andSimonotti 2011). However such knowledge is also required in the AVM performedby quantitative models with regard to the data sampling and the verify of theresults (Kauko and d ’ Amato 2008a, b). The appraisal model is based onuniequational ‘ appraisal functions ’ , on indices measured in the market and on tests.In fi rst approximation, the linear form is preferred for simplicity, for the modularity(the majority of models are linear or linearized or attributable to additive forms), for the understanding of the calculations, the intermediate elements (e.g. marginalprices of the real estate characteristics) and the results of the valuation.