Automated Valuation Model Using Condominium Project Location Effects

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Solution Overview

Problem

Traditional residential property appraisal methods, particularly for condominiums, are subjective and inconsistent, making it difficult to model appropriate comparables and evaluate appraisals accurately due to data inconsistencies and the complexity of condominium projects.

Innovation Solution

An automated valuation model using hedonic regression is applied to property data, with a condominium project variable as a location fixed effect, to identify and refine comparable properties, and determine economic distance, enabling consistent and accurate appraisal evaluations.

Engineering Contradictions & Design Principles

VSEngineering Contradiction Analysis

1Adaptability or versatility

If traditional manual appraisal review methods are used, then appraisers can exercise professional judgment and adaptability, but the process becomes subjective, inconsistent, and difficult to scale systematically

Engineering Contradiction:

Improveappraiser judgment flexibilityVSAvoidappraisal evaluation consistency

Core Design Contradiction:

Adaptability or versatilityVSMeasurement precision

Solution Approach 1:

The patent introduces an automated valuation model (AVM) as an intermediary between the subject property and the appraisal evaluation process. The AVM systematically identifies comparable properties using standardized criteria including condominium project location effects, providing consistent and objective data that supplements appraiser judgment while reducing subjectivity in the review process

Inventive Principle:

Principle #24Intermediary (Mediator)

Solution Approach 2:

The patent segments the property identification process by introducing a specific condominium project variable that divides the location analysis into distinct components: geographic location, condominium project identity, and unit characteristics. This segmentation allows for more precise and consistent comparison of condominium properties while maintaining the ability to evaluate each segment systematically

Inventive Principle:

Principle #1Segmentation

2Adaptability or versatility

If traditional comparable property selection methods are used, then appraisers can identify comparables based on general market knowledge, but it becomes particularly difficult to model appropriate comparables for condominium properties due to data inconsistencies and project complexity

Engineering Contradiction:

Improveappraiser flexibility in comp selectionVSAvoidcondo comparable identification accuracy

Core Design Contradiction:

Adaptability or versatilityVSReliability

Solution Approach 1:

Inventive Principle:

Principle #24Intermediary (Mediator)

Solution Approach 2:

The patent changes the parameters used for property comparison by introducing a condominium project variable that captures location effects specific to condo developments. This parameter change transforms the comparison from general geographic proximity to project-specific similarity, significantly improving the reliability of comparable property identification for condominiums

Inventive Principle:

Principle #35Parameter changes

3Measurement precision

If comprehensive data scrubbing and refinement processes are implemented, then property dataset accuracy improves, but data processing time and computational complexity increase

Engineering Contradiction:

Improveproperty data accuracyVSAvoiddata processing time

Core Design Contradiction:

Measurement precisionVSLoss of time

Solution Approach 1:

The patent applies preliminary action by performing comprehensive data scrubbing, standardization, and refinement processes before the actual appraisal evaluation. The condominium project variable is pre-calculated and stored, so that during appraisal review, the system can quickly retrieve and apply previously processed data without repeating the intensive cleaning and standardization steps

Inventive Principle:

Principle #10Preliminary action

Data Source

PatentUS11010796B2Evaluating condominium appraisals using project as location effect

Publication Date: 2021.05.18 FANNIE MAE

AI summary

Modeling appropriate comparable properties for the assessment of appraisals entails accessing a property dataset, wherein subsets of properties represented in the property data are determined to be members of respective condominium projects. Condominium project identification information is scrubbed, standardized and updated using various techniques. An automated valuation model is applied to the property data, preferably implementing the condominium project variable as a location fixed effect variable. Appraisal reports where the subject property is a condominium are then analyzed using the results of the automated valuation model, including but not limited to ranking and displaying the appraiser-chosen comparables among the model-chosen comparables.