Quiz 5 Valuation Models

Question 1

Advisory Opinion 18 of USPAP says that an appraiser must be able to reasonably conclude that the AVM’s output is _________ before using the AVM.

Answer 1

credible

Question 2

Which USPAP STANDARD(s) address mass appraisals?

Answer 2

STANDARDS 5 and 6

Question 3

“A representation describing an underlying logical structure, relationship, or behavior” is the definition of

Answer 3

model

Question 4

___________ refers to the process of analyzing sets of property and market data to determine the specific parameters of a model.

Answer 4

Calibration

Question 5

Some stepwise regression analysis could be performed through the use of standard spreadsheet application such as all of the following

Answer 5

Microsoft Excel, Lotus, Microsoft Access

Question 6

Computer-assisted mass appraisals (CAMAs) were first adopted by ______________ in the _______.

Answer 6

assessors, 1970s

Question 7

True or False: AVMs were conceived as a way of replacing appraisers in financing transactions.

Answer 7

FALSE

Question 8

“A programmed algorithm for systematically building a multiple linear regression model by adding significant variables, deleting insignficant variables, or both, and then assessing the model resulting from the addition or deletion” is the definition of

Answer 8

stepwise regression analysis

Question 9

A _____________ model calculates value based on physical characteristics.

Answer 9

hedonic

Question 10

A _____________ is one in which the independent variable’s marginal contribution to the value of the dependent variable is constant over the entire range of the data.

Answer 10

linear model

Question 11

An AVMis not an appraisal. True or False

Answer 11

TRUE. An AVM is not an appraisal; but can be a good tool for appraisers to use.

Question 12

“A quantitative technique used to identify and measure adjustments to the sale prices or rents of comparable properties; to apply this technique, sales or rental data on nearly identical properties is analyzed to isolate and estimate a single characteristic’s effect on value or rent” is the definition of

Answer 12

paired data analysis

Question 13

“The process of valuing a ________ of properties as of a given date using ____________ methodology, employing common data, and allowing for _______________ testing” is the definition of mass appraisal.

Answer 13

universe, standard, statistical

Question 14

Which would be strengths of AVMs?

Answer 14

speed, low cost, no appraiser bias

Question 15

Mass appraisal is most often associated with ______________ valuation purposes.

Answer 15

real estate tax assessment

Question 16

You may purchase an AVM from all of the following

Answer 16

Freddie Mac, Corelogic, ATTOM

Question 17

The most common use of mass appraisal for real property is

Answer 17

ad valorem tax assessment

Question 18

“A mathematical model used to develop values for each property within a group or universe of properties” is the definition of

Answer 18

mass appraisal model

Question 19

“Computer software that queries property and market data, analyzes comparable property and market information to assign a value or range of value to a particular property” is the definition of

Answer 19

automated valuation model

Question 20

An appraiser must be able to reasonably conclude that the AVM’s output is _________ before using the AVM.

Answer 20

credible

Question 21

Credibility of the AVM output depends on the quality of its _________.

Answer 21

Database

Question 22

An appraiser bound by USPAP may be asked to run an AVM and communicate its output. Is this an appraisal/appraisal review?

Answer 22

No. The appraiser is acting as an AVM operator only.

Question 23

An appraiser may be asked to review an appraisal report that includes an opinion of value based on the output of an AVM. This is

Answer 23

an appraisal review assignment under USPAP which must follow the requirements of STANDARD 3.

Question 24

Staff Appraiser D, who has access to market databases, is asked to use an AVM to process information. When Appraiser D runs the AVM, she has done no other appraisal research. Appraiser D does not apply any of her appraisal knowledge or judgment in operating the AVM. Appraiser D has entered only property characteristics provided by the client and does not know how the AVM analyzes the data. Is the AVM output an appraisal?

Answer 24

No. The AVM output by itself is not an appraisal. Appraiser D did not apply her appraisal knowledge, judgment, or expertise, nor did she represent that the output was her own opinion of value.

Question 25

Weaknesses of AVM

Answer 25

• There are no existing standards
• They cannot ascertain property condition
• They ignore marketability issues - supply and demand
• They do not work well in heterogeneous areas
• There is no data verification
• They are not very accurate

Question 26

Strengths of AVMs:

Answer 26

• They are fast
• They are free of appraiser bias
• They have a low cost
• They can be a source of property data
• They help understand value trends
• They help assess probabilities of value
• They can be utilized in reviewing and quality control