Edition 2020 Ninth edition

3.3.2. 
The revaluation is carried out by a valuer who is potentially supported by appropri-
ate advanced statistical models.
3.3.3. 
Here too, the models should not be "the sole means of the revaluation". A valuer 
must be in charge.
4. European Banking Authority criteria for advanced statistical models for valuation
and EVS commentary
(full reproduction of EBA Guidelines on loan origination and monitoring; 7 Valuation of immovable 
and movable property; section 7.4)
4.1. 
"236. Institutions should set out, in their policies and procedures, the criteria for 
using advanced statistical models for the purposes of valuation, revalua-
tion and monitoring the values of collateral. These policies and procedures 

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should account for such models' proven track record, property-specific varia-
bles considered, the use of minimum available and accurate information, and 
models' uncertainty."
4.1.1. 
EVS commentary — Credit institutions should familiarise external and internal 
valuers with these policies, procedures and criteria.
4.2. 
"237. Institutions should ensure that the advanced statistical models used are: a. 
property and location specific at a sufficient level of granularity (e.g. postcode 
for immovable property collateral); b. valid and accurate, and subject to robust 
and regular backtesting against the actual observed transaction prices; c. 
based on a sufficiently large and representative sample, based on observed 
transaction prices; d. based on up-to-date data of high quality."
4.2.1. 
EVS commentary — Credit institutions should ensure that external and internal 
valuers are familiarised with all of these characteristics.
4.3. 
"238. When using these advanced statistical models, institutions are ultimately re-
sponsible for the appropriateness and performance of the models, and the 
valuer remains responsible for the valuation that is made using an advanced 
statistical model. Institutions should understand their methodology, input data 
and assumptions of the models used. Institutions should ensure that the docu-
mentation of models is up to date."
4.3.1. 
EVS commentary — As the valuer remains responsible for the valuation that is 
made using an advanced statistical model, the credit institution should also make 
the valuer familiar with the methodology, input data and assumptions of the 
models used.
4.4. 
"239. Institutions should have adequate IT processes, systems and capabilities in 
place and sufficient and accurate data for the purposes of any statistical mod-
el-based valuation or revaluation of collateral."
5. The valuer's use of statistical tools
5.1. 
An AVM is never more than a tool contributing to valuers' estimation of value, for 
which they remain responsible. Furthermore, a stand-alone AVM estimate is not 
a valuation and cannot give a Market Value as defined by EVS 1. It can be used by 
qualified valuers as one input in their comprehensive analysis of the market pro-
vided they are satisfied with their knowledge of the AVM's input data and model.

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European Valuation Standards 2020
5.2. Statistical techniques
5.2.1. 
As discussed in EVS 4 — The Valuation Process, a professional valuation relies 
on the valuer appraising the property in its context, researching and verifying all 
matters having a bearing on the value of the property.
5.2.2. 
The quality of the information will impact the quality of the valuation, so the valuer 
will need to verify any information sources, including their date. The valuation is 
the culmination of the valuer's investigations — in which visiting and inspecting the 
property play a key part — and research of all information and file notes, demon-
strating the valuer's skill in bringing together data from all the various sources, 
using that information efficiently and providing a considered opinion.
5.2.3. 
EVS Part II (Valuation Methodology) discusses the importance of analysing
the market. The examination, investigation and analysis of the available market 
evidence is one of the most important parts of the valuation process. This process 
enables the valuer to determine which market transactions are the most relevant 
and to give due weight to each piece of relevant evidence.
5.2.4. 
Analysis of market evidence is possible using sophisticated techniques such as:
•
Regression analysis, both linear and non-linear;
•
Time series analysis;
•
Geographically weighted models.
5.2.5. 
Mathematical or statistical techniques can only serve as an assistance to the 
valuer. Valuers' estimate of the value of the property has to be based on their best 
and sound judgement drawing on their professional skill applied to their knowl-
edge of the property market.
5.2.6. 
As a general rule, the valuer should be aware that any analytical tool is only as 
reliable as:
•
The data that is fed into it;
•
The analytical technique it uses.
5.2.7. 
Valuers must be very cautious in using any analytical tool as an integral part of 
their valuation reports, since the final opinion of value is their sole responsibility.
5.2.8. 
If the valuer is satisfied with her/his knowledge of the input data and its relevance, 
he/she may use analytical tools as support in, for example:

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•
Statistical analysis of the prices/rents in a particular segment of the property 
market, stating which data have been used and which model;
•
Preparing maps of selected sales/rents.