[1] Hedonic Models on the other hand try to isolate the impact of individual property characteristics in the form of pre-calculated parameters.
When doing a valuation using hedonic models no actual comparison or automated processes take place, but the value is instead calculated by filling property characteristics into specific mathematical equations that contain the pre-defined parameters.
The product of an automated valuation technology comes from the analysis of public record data and computer decision logic combined to provide a calculated estimate of a probable value of a residential property.
An AVM typically includes: In the late 1990s, in the US, this technology was used primarily by institutional investors to determine risk when purchasing collateralized mortgage loans.
The advantages of using AVMs over traditional appraisals are that they save time, money and resources (e.g. there are no transport requirements), thus lowering the cost of valuing a property.
It is claimed that unlike traditional appraisals, AVM outputs do not suffer from the same fraud risk although certain providers can have their systems manipulated intentionally or otherwise if property features are incorrectly entered.
Purchasers relying on an AVM-backed mortgage application will need to get separate advice to establish the true condition of the property.