How to Bring AI-Enabled Valuations to Meet Professional Duty of Care Standards?

Abstract

At the crossroads of technological innovation and established practice, property valuation is experiencing a significant shift with the introduction of artificial intelligence (AI) and machine learning (ML). This paper explores the implications of this shift, focusing on the legal and ethical considerations that arise when AI is applied to real estate valuation. The discussion highlights a pivotal challenge: the need for consistency, objectivity and transparency to ensure accountability in AI-driven methodologies. Drawing from the international valuation standards, the discussion centres on the essential balance between automated precision and the professional duty of care—a balance crucial for maintaining trust and upholding integrity in property valuations. By examining the role of AI within the property market and the consequent legal debates and requirements for transparency, the article underscores the importance of developing AI-enabled valuation models that professionals and consumers alike can trust and understand. This discussion paper also illustrates a best-practice framework that seeks to ensure AI’s contributions to property valuation are as defensible in court as advanced in technology. The proposed framework calls for a concerted cross-disciplinary effort to establish industry standards that support the responsible and effective integration of AI into property valuation, ensuring that these new tools meet the same high standards of reliability and clarity expected by the industry and its clients.

Keywords: Artificial intelligence, machine learning, property valuation, New Zealand, hedonic price model, professional liability, tort law