Since their inception in the mid-1990s, automated valuation models (AVMs) have saved consumers, lenders, servicers, investors, and appraisal management companies (AMCs) hundreds of millions of dollars in cost and time, and have helped mitigate the potential risk of over- or under-valuing a property. AVMs are now commonly used by home buyers and sellers visiting real estate property listing websites, as well as within the mortgage loan and underwriting teams at lenders across the country.
First American Data & Analytics recently introduced Procision™, a new suite of AVMs that use a blended ensemble of state-of-the-art valuation modeling to deliver an exceptional level of accuracy to lenders and financial services providers, as well as other clients, such as those in the fintech and proptech sectors. The Procision AVM suite leverages sophisticated modeling techniques, including the latest machine-learning technologies and the industry’s largest property and ownership database to set a new standard for accuracy and reliability.
Jon Wierks, vice president of data and analytics, leads the team that developed the Procision AVM suite. With nearly three decades of experience in the real estate and valuation industry, he is among the most influential experts in valuation analytics and has helped shape many of the valuation models in use today. He shares insight on First American’s latest Procision launch and his outlook.
Question: Why has First American launched Procision?
"The essential question we always ask is how we can use our expertise in data and analytics to solve customer problems. Once we understand the pain points we are trying to solve for, we use First American’s best-in-class data assets to develop new, innovative solutions to help mortgage lenders, portfolio managers and investors reduce risk and increase efficiency through accurate and predictive analytics tools.
The real estate market is becoming increasingly competitive as lenders and other stakeholders try to close transactions faster and cheaper. We know that it is essential for our customers to have the most accurate data and analysis to make critical business decisions."
Question: How is First American Procision different than other AVM technologies in the market?
"An AVM is only as good as the data that fuels its valuations and the team supporting it. First American’s industry-leading property and ownership database allows us to deliver premier valuation analytics. For example, we have access to data of 99% of deeds, mortgages, and foreclosures, over 3,000 counties for assessor and property ownership, nearly one million active real estate listings, and more.
First American built a next-generation valuation model that incorporates new property details and data points and uses a blended ensemble modeling approach that combines machine learning technologies with industry-specific modeling techniques. Our leadership in data extraction and management, coupled with state-of-the-art automation, positions us well to deliver an efficient, accurate, and differentiated AVM solution to the market.
For every valuation, Procision runs six sub-models whose output is then blended using a seventh machine-learning model to generate the final result. The technologies used by the sub-models include:
• Machine Learning: Two models utilize the latest decision tree and gradient-boosting techniques to leverage large amounts of data.
• Enhanced House Price Indices: Reflect price growth and market changes, anchored in the same point in time.
• Hedonic: Two models compare houses within neighborhoods and markets, adjusting price based on features. Both statistical regression and rules-based models are used for superior accuracy.
• Tax Assessment: Adjusts assessment values to account for local rules. For added accuracy and currency, First American Data & Analytics runs Procision AVM valuations on every residential property in the U.S. every day and we also update the underlying data that fuels the Procision AVM suite daily. An automated surveillance system constantly monitors both data and valuation quality and performs extensive testing to validate the accuracy of the valuations produced for different property types in various geographic markets.
“The real estate market is becoming increasingly competitive as lenders and other stakeholders try to close transactions faster and cheaper. We know that it is essential for our customers to have the most accurate data and analysis to make critical business decisions.”
Question: What excites you most about the continued innovation in AVM technology?
"There is ample opportunity for us to use data in new and creative ways to provide further accuracy and evaluate properties. In fact, we are already working on the next enhancements to our Procision AVM technology. These enhancements include, for example, using more geospatial data to determine external factors that impact a property’s value, and aerial photography to determine property condition. We are also using natural language processing to extract and test more subjective data and property characteristics that are more difficult to quantify. These innovative new data sources are giving the AVMs information that they have never had access to in the past.
I’ve seen AVMs evolve extensively over decades, and it is clear there will always be a way for data to tell us new and interesting stories that result in more accurate and reliable valuations, which is imperative to help our customers stay competitive as the real estate market continues to shift."