Quiz 5 Valuation Models Flashcards
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.
credible
Which USPAP STANDARD(s) address mass appraisals?
STANDARDS 5 and 6
“A representation describing an underlying logical structure, relationship, or behavior” is the definition of
model
___________ refers to the process of analyzing sets of property and market data to determine the specific parameters of a model.
Calibration
Some stepwise regression analysis could be performed through the use of standard spreadsheet application such as all of the following
Microsoft Excel, Lotus, Microsoft Access
Computer-assisted mass appraisals (CAMAs) were first adopted by ______________ in the _______.
assessors, 1970s
True or False: AVMs were conceived as a way of replacing appraisers in financing transactions.
FALSE
“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
stepwise regression analysis
A _____________ model calculates value based on physical characteristics.
hedonic
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.
linear model
An AVMis not an appraisal. True or False
TRUE. An AVM is not an appraisal; but can be a good tool for appraisers to use.
“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
paired data analysis
“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.
universe, standard, statistical
Which would be strengths of AVMs?
speed, low cost, no appraiser bias
Mass appraisal is most often associated with ______________ valuation purposes.
real estate tax assessment
You may purchase an AVM from all of the following
Freddie Mac, Corelogic, ATTOM
The most common use of mass appraisal for real property is
ad valorem tax assessment
“A mathematical model used to develop values for each property within a group or universe of properties” is the definition of
mass appraisal model
“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
automated valuation model
An appraiser must be able to reasonably conclude that the AVM’s output is _________ before using the AVM.
credible
Credibility of the AVM output depends on the quality of its _________.
Database
An appraiser bound by USPAP may be asked to run an AVM and communicate its output. Is this an appraisal/appraisal review?
No. The appraiser is acting as an AVM operator only.
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
an appraisal review assignment under USPAP which must follow the requirements of STANDARD 3.
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?
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.
Weaknesses of AVM
- 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
Strengths of AVMs:
- 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
