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- AAAVM (Appraiser Assisted AVM)An appraisal product where an appraiser guides the AVM program prior to the determination of value. The appraiser makes any selections, corrections, rankings, or adjustments to the data to be submitted to the AVM for valuation.
- Absolute Percentage Sales ErrorThe absolute value of the quantity: (AVM value minus selling price)/selling price, for a target property.
- Absolute ValueThe value of a number or expression regardless of its sign. For example, 3 and -3 (minus 3) both have an absolute value of 3. The mathematical symbol for absolute value is one vertical bar on each side of the number in question, for example, |3|.
- Accuracy
- Actual AgeThe actual number of years that have elapsed since the completed construction of an improvement; also referred to as historical age or chronological age.
- Ad ValoremAccording to value.
- Ad Valorem TaxA tax levied in proportion to the value of the thing(s) being taxed. Exclusive of exemptions, use-value assess- ment provisions, and the like, the property tax is an ad valorem tax.
- Adaptive Estimation Procedure (AEP)A computerized, iterative, self-referential procedure using properties for which sale prices are known to produce a model that can be used to value properties for which sale prices are not known. Also called feedback.
- Additive modelsModels in which the dependent variable is estimated by multiplying each independent variable by its coefficient and adding each product to the constant.
- Address Normalization SystemA component at the front-end of many AVMs which identifies and repairs a variety of minor errors that commonly occur in user-supplied property addresses including both misspellings and incorrect addresses and zip codes.
- Adjusted Hit RateThe percentage of valuations delivered relative to a modified sample population. To gain a better understanding of an AVM’s performance, analysts may remove outliers from the test results or valuations where the model may have had access to the benchmark value.
- AdjustmentsModifications in the reported value of a variable, such as sale price. For example, adjustments can be used to estimate market value in the sales comparison approach by modifications for differences between comparable and subject properties. Note: Adjustments are applied to the characteristics of the comparable properties in a particular sequence that depends on the method of adjustment selected.
- Adverse Land UseA land use that decreases the value of nearby properties, usually because the adverse use is incompatible with the uses of the neighboring properties. A garbage dump near a residential neighborhood is an example of adverse land use.
- AgeSee chronological age; economic life; effective age; and historical age.
- Age/Life MethodA method of estimating accrued depreciation founded on the premise that, in the aggregate, a neat mathematical function can be used to infer accrued depreciation from the age of a property and its economic life. Another term is "straight-line depreciation" (see depreciation, accrued; and depreciation method, straight-line).
- Aggregate MeanSee weighted mean.
- Agricultural PropertyImproved or unimproved land that is devoted to or available for the production of crops and/or other agricultural products, livestock, and agricultural support buildings.
- AlgorithmsComputer-oriented, precisely defined set of steps that, if followed exactly, will produce a prespecified result, for example, the solution to a problem.
- AllocationSee land ratio method.
- Allocation by AbstractionA method of separating a whole property value into land and improvement components. The appraiser estimates replacement cost new, subtracts an appropriate amount for depreciation, and subtracts the remainder from the whole property value to estimate the land value.
- Allocation by RatioA method of separating a whole property value into land and improvement components, in which the appraiser develops proportions of land and improvement values for comparable properties and applies those proportions to the subject's whole property value.
- Allocation MethodA method used to value land, in the absence of vacant land sales, by using a typical ratio of land to improvement value. Also called land ratio method.
- Amenity
- Analog(1) The form of data display in which values are shown in graphic form, such as curves. (2) A form of computing in which values are represented by directly measurable quantities, such as voltages or resistances. Note: Analog computing methods contrast with digital methods, in which values are treated numerically.
- Analyst-Assisted AVM (AAAVM)A hybrid valuation product that relies on the experience of a valuation professional, but not necessarily a state-licensed or state-certified appraiser, to validate and supplement an AVM’s value conclusions.
- Ancillary DataSubsidiary data used to define the area of interest, for example, topographic, administrative, or geologic data. Ancillary data may be digitized and merged with the primary image data to facilitate analysis.
- Anticipated Use MethodA method used to appraise under-developed land. Expected improvements to the land are specified, and total development costs are estimated and subtracted from the projected selling price to give an estimate of the value of the undeveloped land.
- Appraisal(1) The act of estimating the money value of property. (2) The money value of property as estimated by an appraiser. (3) Of or pertaining to appraising and related functions, for example, appraisal practice, appraisal services. Compare assessment.
- Appraisal, AcquisitionAn appraisal to determine the market value of a property that is to be taken by eminent domain, so that the owner might be justly compensated.
- Appraisal, CompleteThe act or process of estimating value or an estimate of value performed without invoking the departure provision (USPAP).
- Appraisal Emulation ModelThe appraisal emulation model that follows the steps that an appraiser might follow in forming a value estimate (although not with the same insight or flexibility that a qualified appraiser brings to the assignment). The model selects comparable sales using some standard criteria. It then rates those comparable sales by suitability, based on the physical and sales characteristics of each comparable sale, by adjusting the varying elements (much as is done on an appraisal form); the model then calculates an estimate of value.
- Appraisal, LimitedThe act or process of estimating value or an estimate of value performed under and resulting from invoking the departure provision (USPAP).
- Appraisal MethodsThe three methods of appraisal, that is, the cost approach, income approach, and sales comparison approach.
- Appraisal PrinciplesThe economic concepts underlying appraisal. See under principle of: anticipation, balance, change, conformity, contribution, and substitution. See competition; demand; highest and best use; and variable proportions, law of.
- Appraisal Ratio(1) The ratio of the appraised value to an indicator of market value. (2) By extension, an estimated fractional relationship between the appraisals and market values of a group of properties. See level of appraisal.
- Appraisal ReportThe oral or written communication of a completed appraisal.
- Appraisal-Sale Price RatioThe ratio of the appraised value to the sale price (or adjusted sale price) of a property; a simple indication of appraisal accuracy.
- AppraiseTo make an estimate of value, particularly of the value of property.
- Appraised ValueThe estimate of the value of a property before application of any fractional assessment ratio, partial exemption, or other adjustments.
- Appraiser Emulation Model
- AppreciationIncrease in value of a property, in terms of money, from causes other than additions and betterments. For example, a farm may appreciate if a shopping center is built nearby, and property of any sort may appreciate as a result of inflation. Contrast depreciation.
- Area, FloorSee floor area of building.
- Area, GroundSee ground area of building.
- Arm's-Length Transaction(1) A sale between a willing buyer and a willing seller that are unrelated and are not acting under duress, abnormal pressure or undue influences. (2) A sale between two unrelated parties, both seeking to maximize their positions from the transaction.
- ArrayAn ordered arrangement of data, such as a listing of sales ratios, in order of magnitude.
- Assessed Value(1) A value set on real estate and personal property by a government as a basis for levying taxes. (2) The monetary amount for a property as officially entered on the assessment roll for purposes of computing the tax levy. Assessed values differ from the assessor's estimate of actual (market) value for three major reasons: fractional assessment ratios, partial exemptions, and decisions by assessing officials to override market value. The process of gathering and interpreting economic data to provide information that can be used by policymakers to formulate tax policy.
- Assessment(1) In general, the official act of determining the amount of the tax base. (2) As applied to property taxes, the official act of discovering, listing, and appraising property, whether per formed by an assessor, a board of review, or a court. (3) The value placed on property in the course of such act.
- Assessment, Acquisition-BasedOne of a small number of non-market assessment valuation standards. A property is placed on the tax roll at its acquisition cost; that value is not changed until the next qualifying sale, as, for example, under California's Proposition 13.
- Assessment-Appraisal RatioThe ratio of the assessed value of a property to an independent appraisal.
- Assessment, Arbitrary(1) Assessment without consideration of such information as is reasonably available to the assessor. (2) Assessment according to the "best knowledge and belief" of the assessor when a person fails to list property in accordance with law (a usage not recommended). Note: Although this term is commonly used by assessors in the second of these senses to refer to a legal assessment, the courts commonly use it in the first sense to mean an illegal assessment. Compare assessment, Doomage.
- Assessment, Area-BasedOne of a small number of nonmarket assessment valuation standards. A property is placed on the tax roll at a value reflecting the land area or the surface area (floor area) of an improvement.
- Assessment, CentralAn original assessment made by an officer or body whose jurisdiction with respect to the property so assessed extends over two or more local assessment districts.
- Assessment DateThe status date for tax purposes. Appraised values reflect the status of the property and any partially completed construction as of this date.
- Assessment DistrictThe administrative area in which the officer or public body responsible for making the original assessment has jurisdiction. Note: The local assessment district is usually cotermi nous with a county, township, or city, but the state itself may be the assessment district for some types of property.
- Assessment, DoomageAn assessment made without adequate information when a taxpayer fails to comply with laws requiring him or her to list his or her property for taxation. Compare assessment, arbitrary; assessment, penalty.
- Assessment EquityThe degree to which assessments bear a con- sistent relationship to market value.
- Assessment, FractionalAssessment at a fraction of full value, or of such other standard as may be fixed by law. Note: Fractional as sessment may constitute underassessment, or it may be sanctioned by law as, for example, in Alabama, where all property is legally assessable at 60 percent of full value, and in Minnesota, where various classes of property are assessable at various percentages of full value.
- Assessment, JeopardyAn assessment made out of the regular routine when there is reason to believe that adherence to such routine will jeopardize the collection of taxes on the property so assessed.
- Assessment JurisdictionA geographical area within which an assessing officer has the responsibility to determine the assessed value of property for ad valorem taxation.
- Assessment LevelThe common or overall ratio of assessed val- ues to market values.
- Assessment MapsSee cadastral map.
- Assessment, Original(1) The official act of the assessor in discov ering, listing, and appraising property for tax purposes up to the point at which the assessment roll is first filed for public inspec tion. (2) The act of assessment which first places a property on the assessment roll for the particular assessment date; the agency that performs this act is the original assessing agency (or jurisdiction). (3) The valuation at which property is listed in the assessment roll at the time it is first filed for public inspection.
- Assessment Period(1) The period beginning with the assessment date and ending with the date on which the assessor is required to complete the original assessment. (2) Sometimes used synony mously with assessment year.
- Assessment Progressivity (Regressivity)An appraisal bias such that high-value properties are appraised higher (or lower) than low-value properties in relation to market values. See price-related differential.
- Assessment Ratio(1) The fractional relationship an assessed value bears to the market value of the property in question. (2) By extension, the fractional relationship the total of the assessment roll bears to the total market value of all taxable property in a juris diction. See level of assessment and fractional assessments.
- Assessment Ratio StudyAn investigation intended to determine the assessment ratio and assessment equity.
- Assessment, RetrospectiveAn assessment made after the close of a tax year on property that was legally assessable, but was not listed for taxation during such year.
- Assessment RollThe basis on which the property tax levy is al located among the property owners in a jurisdiction with taxing powers. The assessment roll usually lists an identifier for each tax able parcel in the jurisdiction, the name of the owner of record, the address of the parcel or the owner, the assessed value of the land, the assessed value of the improvements, applicable exemption codes, and the total assessed value. Synonyms include "cadastre," "list," "grand list," "abstract of ratables," and "rendition."
- Assessment-Sale Price RatioThe ratio of the assessed value to the sale price (or adjusted sale price) of a property.
- Assessment, StandardizedA system of property tax assessments based largely on the uniform application of established rules and principles. Note: Standardized assessment is usually manifested by the use of land value maps, depth and corner influence tables, building classification and cost schedules, reproduction cost and depreciation schedules, and the like.
- Assessment, StatutoryValuation of a property in a specified use at an amount specified by law (for example, a golf course will be assessed at ten dollars per acre); most often used for mineral prop erties and open space.
- Assessment Year(1) A year beginning on the day after the assessment date and ending on the assessment date in the calendar year next following. (2) The 365 days beginning with the appraisal date.
- Assessor(1) The head of an assessment agency; sometimes used collectively to refer to all administrators of the assessment func tion. (2) The public officer or member of a public body whose duty it is to make the original assessment.
- AttributeCharacteristic of a property.
- AuditA systematic investigation or appraisal of procedures or operations for the purpose of determining conformity with specifi cally prescribed criteria.
- Audit ProgramThe procedures undertaken or particular work done by an accountant in conducting an examination.
- Audit TrailA set of records of the changes made to another set of records.
- Automated Valuation ModelAn automated valuation model (AVM) is a mathematically based computer software program that produces an estimate of market value based on market analysis of location, market conditions, and real estate characteristics from information that was previously and separately collected. The distinguishing feature of an AVM is that it is a market appraisal produced through mathematical modeling. Credibility of an AVM is dependent on the data used and the skills of the modeler producing the AVM.
- AverageThe arithmetic mean.
- Average Absolute DeviationSee average deviation.
- Average DeviationThe arithmetic mean of the absolute devia tions of a set of numbers from a measure of central tendency, such as the median. Taking absolute values is generally understood without being stated. The average deviation of the numbers 4, 6, and 10 about their median (6) is (2 + 0 + 4) ÷ 3 = 2. The average deviation is used in computing the coefficient of dispersion (COD).
- AVM-Assisted Appraisal (AVMAA)With an AVM-assisted appraisal, an experienced state-licensed or state-certified appraiser develops a USPAP-compliant appraisal based on the results of a reliable AVM.
- AVM CascadeA process that uses a ranking of AVMs (aka “Model Preference Table”®) in conjunction with user-defined logic to determine when to accept an AVM value or go to the next model in the ranking.
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- Back-testing
- Base-Home ApproachA method of appraising single - Family residential properties whereby each residence to be appraised is compared with one having common or typical characteristics and of known value, called the base home, and differences between the two in terms of condition, size, number of garages, and the like are weighted by the appraiser in the determination of the value of the property to be appraised.
- Base-Lot MethodA method of appraising land parcels whereby each parcel to be appraised is compared with a parcel having common or typical characteristics and of known value, called the base lot, and differences between the two in terms of location, size, shape, topography, and the like are analyzed by the appraiser in estimating the value of the lot to be appraised.
- Benchmark(1) A term used in land surveying to mean a known point of reference. (2) In property appraisal, a property of known value and of known effective age and replacement cost. (3) By extension, a model property to be used in determining by comparison the grade or quality class of other properties.
- Benchmark ValueThe market value against an AVM’s value predictions will be compared for performance testing. Recent, arm’s length transactions are preferred.
- Bias
- Binary (Dummy) Variable(1) Binary variables are qualitative data items that have only two possibilities – yes or no (for example, corner location). (2) A variable for which only two values are possible, such as results from a yes-or-no question; for example, does this building have any fireplaces? Used in some models to separate the influence of categorical variables. Also called a dichotomous variable or dummy variable.
- Blended ModelAn AVM that incorporates a combination of valuation methods including but not limited to: Hedonic, home price Index, Hybrid, Tax Assessed value multipliers, statistical regression or an Appraisal Emulation approach.
- Blind TestingAVM performance testing where analysts remove any valuations for which the model may have had access to the benchmark value. Blind testing provides users with a better understanding of how a particular AVM or cascade will perform in the production setting.
- BootstrapA computer-intensive method of statistical inference that is based on a repeated resampling of data to provide more information about the population characteristics. The bootstrap is a data-driven procedure that is particularly useful for confidence interval approximation when no traditional formulas are available or the sample has been drawn from a population that does not conform to the normal distribution.
- Bump LogicUser-defined methods or criteria to select from or combine various classes of valuation services, e.g., AVM, BPO, hybrid valuation, drive-by or full appraisal.
- Bundle of Rights
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- CalibrationThe process of estimating the coefficients in a mass appraisal model.
- CAMASee computer-assisted mass appraisal.
- CascadeA decision-process for using multiple AVMs to evaluate a subject property. The logic underlying an AVM cascade consists of two components - a model preference table and usage rules (for instance, confidence score thresholds) for each model included in the cascade. Cascades cycle through a predetermined progression of AVMs until one of these models produces a sufficiently accurate valuation.
- Cash-equivalent Sale PriceAn indicator of market value that is a refinement over the raw sale price, in that the effects of unusual financing arrangements and extraneous transfers of personal property have been removed. See adjusted sale price.
- Categorical VariableA variable summarizing more complex qualitative judgments by assigning each to a category or giving each a rating. For example, quality of construction might be categorized as poor, fair, average, or good, or assigned a rating from 1 to 4. The categories might then be scaled by assigning a value of
- Caveat Emptor"Let the buyer beware." A common maxim stating that the buyer purchases at his or her own risk.
- Central Tendency, Measure of
- Chi-squareA particular statistic, and a particular frequency distribution associated with it, of interest in inferential statistics.
- Chronological AgeThe number of years elapsed since an original structure was built. Synonyms are actual age and historical age. Contrast with effective age.
- Cluster AnalysisA statistical technique for grouping cases (for example, properties) based on specified variables, for example, size, age, and construction quality. The objective of cluster analysis is to generate groupings that are internally homogenous and highly different from one another. Various cluster algorithms can be employed.
- Coding(1) The act of reducing a description of a unique object, such as a parcel of real estate, to a set of one or more measures or counts of certain of its characteristics, such as square footage, number of bathrooms, and the like. (2) Encoding, a related term, is usually used to refer to the act of translating coded descriptions useful to human beings into a form that can be processed by computers. (3) Coding is sometimes also used to refer to the writing of instructions that direct the processing done by computers.
- Coefficient(1) In a mathematical expression, a number or letter preceding and multiplying another quantity. For example, in the expression, 5X, 5 is the coefficient of X, and in the expression aY, a is the coefficient of Y. (2) A dimensional statistic, useful as a measure of change or relationship.
- Coefficient of ConcentrationThe percentage of observations falling within a specified percentage (say, 15 percent) of a measure of central tendency.
- Coefficient of Determination (R2)A statistic that characterizes two or more sets of numbers. The coefficient of determination, when multiplied by 100, gives the percentage strength of the (linear) relationship between or among the sets of numbers. (See correlation.) For two variables, the coefficient of determination and the square of the correlation coefficient are identical; for three or more variables, the coefficient of determination measures the strength of the relationship between the dependent variable and all the independent variables combined.
- Coefficient of Disperson (COD)An AVM Performance Metric that measures precision. The COD measures the average percentage deviation of the AVM valuation-to-sales price ratios from the median AVM valuation-to-sales price ratio. See also "Weighted Coefficient of Dispersion."
- Coefficient of Variation (COV)An AVM Performance Metric that measures a combination of accuracy and precision. The COV is the standard deviation divided by the mean AVM valuation-to-price ratio. See also "Weighted Coefficient of Variation."
- CompSee Comparable
- Comp SetThe set of properties that have been selected for valuation purposes of the Subject Property.
- Comparable (“Comp”)A sale in the area of the Subject Property that has characteristics and attributes that are similar to those of the Subject Property and is considered for valuation purposes.
- Comparable Sales; Comparables(1) Recently sold properties that are similar in important respects to a property being appraised. The sale price and the physical, functional, and locational characteristics of each of the properties are compared to those of the property being appraised in order to arrive at an estimate of value. (2) By extension, the term "comparables" is sometimes used to refer to properties with rent or income patterns comparable to those of a property being appraised.
- Comparable Sales ModelWhether performed by an appraiser or an ‘appraiser emulation model,’ comparable sales analysis seeks to identify properties that resemble the subject in terms of location and building attributes, and then adjust these ‘comparables’ to compensate for any dissimilarities. These adjustments form the basis for an estimate of market value.
- Computer-Assisted Mass Appraisal (CAMA)A system of appraising property, usually only certain types of real property, that incorporates computer - Supported statistical analyses such as multiple regression analysis and adaptive estimation procedure to assist the appraiser in estimating value.
- ConditionA judgment of the depreciation of an improvement. Note: This is a difficult area of comparison because although the condition of the subject is known, it is difficult to know the condition of the comparable. Differences in condition may justify variances in selling prices of similar assets. An investigation of the condition of the comparables should be done, if possible.
- Confidence IntervalA range of values, calculated from the sample observations, that are believed, with a particular probability, to contain the true population parameter (mean, median, COD). The confidence interval is not a measure of precision for the sample statistic or point estimate, but a measure of the precision of the sampling process. See reliability.
- Confidence LevelThe required degree of confidence in a statistical test or confidence interval, commonly 90, 95, or 99 percent. A 95 percent confidence interval would mean, for example, that one can be 95 percent confident that the population measure (such as the median or mean appraisal ratio) falls in the indicated range.
- Confidence ScoreA metric that seeks to identify how ‘close’ an estimate of value will be to the Reference Value.
- Conformity
- Contribution
- Contributory ValueThe amount a component of a property contributes to the total market value. For improvements, contributory value must be distinguished from cost.
- Control SamplePart of a set of data set aside for testing the results of analysis.
- CorrelationA statistical phenomenon (and a technique for estimating its strength) whereby knowledge of one fact about a thing implies some knowledge of a second fact about that thing. For example, because the volume and weight of water are correlated, knowing that a quantity of water is one gallon also means knowing that its weight is eight and one-third pounds. Linear correlation, the kind most often encountered, means that an increase in one factor in some proportion (say, a doubling) changes the other in the same proportion. With curvilinear correlation, as between the radius and the area of a(...)
- Correlation Coefficient (r)A statistic that characterizes two or more sets of numbers and, when squared and multiplied by 100, gives the percentage strength of the (linear) relationship between the two sets of numbers. For example, if the coefficient of correlation between measures of the height and weight of a group of people were 0.9, then one would deduce that knowing the height of someone (loosely speaking) would explain (or account for) 81 percent of the weight.
- Correlation MatrixThe table of numbers used to display the correlation coefficients for each pair of variables when three or more variables are thought to be correlated.
- Cost Approach(1) One of the three approaches to value, the cost approach is based on the principle of substitution – that a rational, informed purchaser would pay no more for a property than the cost of building an acceptable substitute, with like utility. The cost approach seeks to determine the replacement cost new of an improvement less depreciation plus land value. (2) The method of estimating the value of property by: (a) estimating the cost of construction based on replacement or reproduction cost new or trended historical cost (often adjusted by a local multiplier); (b) subtracting(...)
- CoverageThe geographic counties and municipalities in which an AVM is functional or performs acceptably.
- Cross ValidationA statistical procedure to assess how well a model, fit using a training dataset, predicts outcomes in a holdout dataset, drawn from the same population as the training dataset.
- Current-Market-Value AppraisalsAppraisals that reflect contemporary market values rather than market values at some point in the past. Currency is commonly taken to be implicit in the term market value.
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- DataInformation expressed in any of a number of ways. "Data" is the general term for masses of numbers, codes, and symbols generally, and "information" is the term for meaningful data. "Data" is the plural of datum, one element of data.
- Data EditThe process of examining recorded data to ensure that each element of data is reasonable and is consistent with others recorded for the same object, such as a parcel of real estate. Data editing, which may be done by human beings or by computer, is essentially a mechanical process, distinct from verifying the correctness of the recorded information by calling or writing property owners.
- Data ManagementThe human (and sometimes computer) procedures employed to ensure that no information is lost through negligent handling of records from a file, that all information is properly supplemented and up-to-date, and that all information is easily accessible.
- Date, AssessmentSee assessment date.
- Date of AcquisitionThe effective purchase date of an asset. From the date of acquisition, the asset must appear in the accounts and in financial statements, and depreciation, if any, must be recorded.
- Date of Sale (date of transfer)The date on which the sale is agreed. This is considered to be the date the deed, or other instrument of transfer, is signed. The date of recording can be used as a proxy if it is not unduly delayed as in a land contract.
- De Minimis ThresholdThe minimum loan amount for which the federal banking agencies require a real estate appraisal. In 2019, the de minimis threshold was increased to $400,000. All real estate-related transactions originated or purchased by a federally regulated lending institution where the loan amount exceeds $400,000 require a USPAP-compliant real estate appraisal performed by a state-licensed or state-certified appraiser.
- Deferred MaintenanceRepairs and similar improvements that normally would have been made to a property but were not made to the property in question, thus increasing the amount of its depreciation.
- DenominatorIn a fraction, the number by which another number (the numerator) is divided. For example, the denominator of 3/4 is 4.
- Dependent VariableA variable, such as sale price, the value of which is predicted by the values of other variables, such as location and finished living area. Such a variable may be said to depend on the other (independent) variables.
- DepreciationLoss in value of an object, relative to its replacement cost new, reproduction cost new, or original cost, whatever the cause of the loss in value. Depreciation is sometimes subdivided into three types: physical deterioration (wear and tear), functional obsolescence (suboptimal design in light of current technologies or tastes), and economic obsolescence (poor location or radically diminished demand for the product).
- Descriptive Statistics(1) The branch of the science of statistics that is concerned only with characterizing or describing a set of data (numbers). (2) By extension, the measures used to characterize a particular set of data. Compare inferential statistics.
- Dichotomous VariableSee binary variable.
- Digital DataData displayed, recorded, or stored in binary notation.
- Digital ImageAn image having numeric values representing tones. Each numeric value represents a different tone.
- Direct Market Method/AnalysisOne of two formats of the sales comparison approach to value (the other being the Comparable Sales Method). In the direct market method, the market analyst specifies and calibrates a single model used to estimate market value directly using multiple regression analysis or another statistical algorithm.
- Direct Market ModelsDirect market models analyze how various housing characteristics influence sales prices in a particular period and geographic area. These models typically describe market value as a function of a property’s location and physical attributes. Direct market models are noted for their superior accuracy compared to other approaches; however, their substantial data requirements often result in a lower percentage of usable valuations, as many states lack sufficiently detailed property records to fuel this type of AVM. Hedonic models are location-specific and therefore difficult to generalize(...)
- Discrete DataDiscrete data are qualitative items that have three or more predefined values (for example, topography: level, rolling, or steep).
- Discrete VariableA variable for which it is not conceivable that, given any two observed values, a value lying between them may occur. For example, the number of rooms in a house is a discrete variable, but the living area of the house is not. See binary variable and continuous variable.
- DispersionThe degree to which data are distributed either tightly or loosely around a measure of central tendency. Measures of dispersion include the average deviation, coefficient of dispersion, coefficient of variation, range, and standard deviation.
- Distribution-free StatisticsA set of robust nonparametric methods whose interpretation or reliability does not depend on stringent assumptions about the distribution of the underlying population from which the sample has been drawn. See parametric statistics.
- Dummy VariableSee binary variable.
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- Economic (External) Obsolescence(1) A cause of depreciation that is a loss in value as a result of impairment in utility and desirability caused by factors outside the property's boundaries. (2) Loss in value of a property (relative to the cost of replacing it with a property of equal utility) that stems from factors external to the property. For example, a buggy-whip factory, to the extent that it could not be used economically for anything else, suffered substantial economic obsolescence when automobiles replaced horse-drawn buggies.
- Effective AgeThe typical age of a structure equivalent to the one in question with respect to its utility and condition, as of the appraisal date. Knowing the effective age of an old, rehabilitated structure or a building with substantial deferred maintenance is generally more important in establishing value than knowing the chronological age.
- EfficiencyThe extent to which an organization will be able to use a particular AVM or AVM cascade for a specific application. Analysts frequently measure efficiency or ‘usability’ through various hit rates, especially usable hit rates.
- Elasticity(1) The responsiveness of supply and demand to changes in price. Supply or demand that changes rapidly in response to price changes is "elastic." Supply or demand that changes slowly in response to price changes is "inelastic." (2) A measure of the responsiveness of tax yields to changes in economic conditions. The yield of an elastic tax increases rapidly in a growing economy. The yield of an inelastic tax increases slowly. Often measured by the formula: percent change in tax ÷ percent change in personal income.
- ErrorThe difference between the actual value of a variable and the expected value of the variable exclusive of sampling problems. Errors may be positive or negative, although in common speech taking the absolute value of the errors is sometimes implied. In multiple regression analysis, the term "error" is often used loosely to mean residual.
- Estate, RealSee real estate.
- Estimated ValueThe estimated Market Value as of a specified date.
- Euclidean Distance MetricA measure of distance between two points “as the crow flies”. In property valuation it is used to find the nearest neighbor, or similar property based on an index of dissimilarity between property location, or attributes. When using multi-variate selection the squared difference is divided by the standard deviation of the variable so as to normalize the differences. Also see Minkowski Metric
- Exploratory Data AnalysisThat part of statistical practice concerned with reviewing the data set to isolate structures, uncover patterns, or reveal features that may improve the confirmatory analysis.
- ExponentA symbol usually written to the right and above an expression to indicate particular mathematical operations. For example, 62 means 6 × 6, or six squared. Fractional exponents indicate inverse operations; for example, an exponent of 1/2 signifies a square root. Exponents are also called powers. Valuation models make use of the following properties of exponents: A number raised to the exponent 0 is always 1.00; zero raised to any power is zero; any number raised to the power 1 is itself. Negative numbers cannot have exponents less than 1.
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- Factor(1) An underlying characteristic of something (such as a house) that may contribute to the value of a variable (such as its sale price), but is observable only indirectly. For example, construction quality is a factor defined by workmanship, spacing of joists, and materials used. Factor definition and measurement may be done subjectively or by a computer-assisted statistical algorithm known as factor analysis. (2) Loosely, any characteristic used in adjusting the sale prices of comparables. (3) The reciprocal of a rate. Assessments may be equalized by multiplying them by a factor equal(...)
- Failure MagnitudeAn AVM Performance Metric that measures a combination of accuracy and precision. The mean absolute error percentage sales error for properties for which the AVM fails to predict selling prices to within +/- (a given percentage, for example, +/- 15%).
- Failure MAPEAn AVM Performance Metric that measure a combination of accuracy and precision. The median absolute error percentage sales error for properties for which the AVM fails to predict selling prices to within +/- (a given percentage, for esample, +/- 15%).
- Failure RateAn AVM Performance Metric that measures a combination of accuracy and precision. The percentage of properties for which the AVM fails to predict selling prices to within +/- (a given percentage, for example, +/- 10%).
- Federally Related TransactionAccording to the federal banking agencies’ appraisal regulations, any real estate-related financial transaction that requires a real estate appraisal.
- Fee AppraisalAppraisal of properties one at a time for pay.
- Fee SimpleIn land ownership, complete interest in a property, subject only to governmental powers such as eminent domain. Also fee simple absolute. See estate in fee simple; fee; and absolute ownership.
- FeedbackSee adaptive estimation procedure.
- Field ReviewThe practice of reviewing the reasonableness of assessments by viewing the properties in question, sometimes by examining their interiors but more often by looking at their exteriors.
- FlowchartAny of a number of kinds of graphic descriptions of an algorithm, showing the operations, data flow, equipment, and so on.
- Forecast Standard DeviationA measure of the expected error range of an estimate by an AVM, expressed as a percentage or a decimal. The lower the FSD, the higher the confidence in the precision of the estimate. Example: if the FSD for an estimate is 10%, then the expectation is that 68% of the time the actual market value will fall within +/- 10% of the model estimate.
- Forecasted ValuationEstimate of value for subject property at a point in time in the future.
- Forecasting ModelsAn AVM that forecasts future changes in property values based on a wide range of macroeconomic variables.
- ForeclosureThe legal process by which a lien on a property is enforced.
- Frequency DistributionA table showing the number or percentage of observations falling in the boundaries of a given set of classes. Used in ratio studies to summarize the distribution of the individual ratios. See class; histogram; and mode.
- Functional ObsolescenceLoss in value of a property resulting from changes in tastes, preferences, technical innovations, or market standards.
- Functional UtilityThe ability of improvements to satisfy market standards and demands.
- FurlongA land measure of 1/8 mile or ten chains or forty rods.
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- Gantt ChartA form of bar chart used in project management. Each element (task) of a project is represented by a horizontal bar. The bars are placed on the chart according to a time scale. The left end of each bar indicates when the task is to begin. The length of each bar indicates the duration of the task. The right end of each bar indicates when the task is to be completed.
- Generally AcceptedGiven authoritative recognition by professional bodies such as the Financial Accounting Standards Board and its Generally Accepted Accounting Principles (GAAP).
- GeocodeA code used to locate or identify a point, such as the center of a parcel of real estate, geographically. The code is composed of the east - West and north - South coordinates of the point relative to some standard point of reference.
- GeocodingGeographical referencing or coding of data.
- Geographic Information System
- Geometric MeanA measure of central tendency computed by multiplying the values of all of the observations by one another and then taking the result to an exponent equal to one divided by the number of observations. The geometric mean is particularly appropriate when a typical rate of change is being calculated, such as an inflation rate or a cost index.
- Goodness-of-fitA statistical estimate of the amount, and hence the importance, of the errors or residuals for all the predicted and actual values of a variable. In regression analysis, for example, goodness of fit indicates how much of the variation between independent variables (property characteristics) and the dependent variable (sales prices) is explained by the independent variables chosen for the AVM.
- Gross Hit RateThe number of valuations delivered relative to the total number of property addresses in the test sample; usually expressed as a percentage (e.g., 1,000 properties were submitted to an AVM and 600 properties were returned for a 60% gross hit rate).
- h
- Harmonic Mean RatioThe reciprocal of the arithmetic mean of the reciprocals of each value in the data set. The harmonic mean ratio is less affected by extreme values in the data set than the arithmetic mean or the geometric mean.
- Hedonic ModelThe term hedonic model broadly refers to a class of property-specific AVMs that examine housing characteristics (both physical and locational) to estimate a subject’s market value. These models operate under the assumption that a house is a composite good comprising many traits that appeal to consumers in varying degrees. Through the application of direct market and comparable sales analyses, hedonic AVMs attempt to quantify the extent to which certain attributes contribute to a property’s overall value, and then develop value conclusions based on these findings.
- Hedonic Price IndexAn analytical model used to quantify the pricing tradeoff between measurable product capacity and intangible attributes such as an amenity feature, design, or reputation. See also isoquant.
- Hedonic pricingHedonic pricing attempts to take observations on the overall good or service and obtain implicit prices for the goods and services. Prices are measured in terms of quantity and quality. When valuing real property the spatial attributes and property specific attributes are valued in a single model. Calibration of the attribute components is performed statistically by regressing the overall price onto the characteristics.
- Hedonic RegressionA multivariate analysis that predicts and explains the value of individual characteristics bundled together to form a good or service; based on the marginal utility of good character and the desirability of that good.
- HeterogeneousUnlike; without interrelation. The opposite of homogeneous.
- HeteroscedasticityNon-constant variance, specifically, in regression analysis a tendency for the absolute errors to increase (fan out) as the dependent variable increases.
- Highest and Best UseA principle of appraisal and assessment requiring that each property be appraised as though it were being put to its most profitable use (highest possible present net worth), given probable legal, physical, and financial constraints. The principle entails first identifying the most appropriate market and, second, the most profitable use within that market. The concept is most commonly discussed in connection with underutilized land.
- HistogramA bar chart or graph of a frequency distribution in which the frequencies of the various classes are indicated by horizontal or vertical bars whose lengths are proportional to the number or percentage of observations in each class.
- Historical AgeThe number of years elapsed since an original structure was built. Synonyms are actual age and chronological age. See cost, original.
- Hit RateThe percentage of properties that have been valued by the AVM. See also "Gross Hit Rate" and "Adjusted Hit Rate."
- Hold-out samplePart of a set of data set aside for testing the results of analysis.
- Holdout DatasetAlso called a "hold-out sample." A dataset drawn from the same population as the training dataset that is not used to calculate the AVM valuations. The holdout dataset is used for testing. Cross-validation techniques allow sales in the training dataset to be reused as the holdout set.
- HomogeneousPossessing the quality of being alike in nature and therefore comparable with respect to the parts or elements; said of data if two or more sets of data seem drawn from the same population; also said of data if the data are of the same type (that is, if counts, ranks, and measures are not all mixed together).
- House Price IndexA model that provides an estimate of a property’s value as a function of time. HPIs find the house price path most consistent with observed appreciation or depreciation rates in a region. Typically referred to as an “index of home price appreciation,” indexes are mathematical algorithms that ad- just property values up or down to reflect price changes over time. These models are price-specific and not property-specific.
- Hybrid ModelsModels that incorporate both additive and multiplicative components. See also additive model, hedonic models and multiplicative model.
- Hybrid ModelsModels that incorporate both additive and multiplicative components. See also additive model, hedonic models and multiplicative model.
- HypothesisA statement in inferential statistics the truth of which one is interested in determining. The usual procedure is to state what one chooses to accept in the absence of sufficient evidence to the contrary (the statement is called the null hypothesis), specify the relationship or statement to be proved (the alternative hypothesis), and analyze the available data to determine whether the null hypothesis can be rejected (and hence the alternative hypothesis accepted) at some confidence level.
- i
- IAAOInternational Association of Assessing Officers.
- ImprovementAnything done to raw land with the intention of increasing its value. A structure erected on the property constitutes one very common type of improvement, although other actions, such as those taken to improve drainage, are also improvements. Although such cases are rarely intentional, "improvements" can conceivably diminish the value of the land; note, however, that easements restricting the use and value of land are not considered improvements.
- ImprovementsBuildings, other structures, and attachments or annexations to land that are intended to remain so attached or annexed, such as sidewalks, trees, drives, tunnels, drains, and sewers. Note: Sidewalks, curbing, sewers, and highways are sometimes referred to as "betterment," but the term "improvements" is preferred.
- Income ApproachOne of the three approaches to value, based on the concept that current value is the present worth of future benefits to be derived through income production by an asset over the remainder of its economic life. The income approach uses capitalization to convert the anticipated benefits of the ownership of property into an estimate of present value.
- IncurableA part of depreciation for which it is not economical to correct the condition, and if corrected, the cost of correcting the condition exceeds the value added.
- Independent AppraisalAn estimate of value using a model different from that used for assessment purposes. Independent appraisals are used to supplement sales in sales ratio studies or in appraisal ratio studies.
- Independent ValidationProcess/Model validation designed and executed by parties that are separate (independent) from those that parties that build, sell, resell or are using or running the system being validated. The validating parties may be internal to the organization (e.g. credit risk managers) or independent third-parties (e.g. consultants). Validation should include conceptual soundness as well as back-testing against out-of-sample benchmarks. It should be done by staff with appropriate qualifications and incentives.
- Independent VariableA variable whose value is not determined by other (dependent) variables.
- IndexA Valuation Method that provides an estimate of value as a function of time. An index Method finds the house price path most consistent with observed appreciation/depreciation rates in a region. Typically referred to as an “index of home price appreciation,” indexes are mathematical algorithms that adjust home price values (up or down) for the passing of time.
- InelasticSee elasticity.
- Inferential StatisticsThe branch of statistical studies concerned with making predictions about the values of a large number of observations of a variable on the basis of a small number of observations of that variable and related facts. (2) By extension, the statistics calculated in such predictions.
- Insured ValuationThese products safeguard clients against losses incurred due to an inaccurate assessment of real estate collateral - for instance, if a loan goes into default or enters foreclosure. Vendors warrant the reliability of their valuations and work with top-rated insurers to offer coverage on a range of AVMs and derivative products.
- IterationOne repetition or repeated cycle in a process of estimating values as close as possible to actual values by repeated approximations. The results of each approximation are used in the next one.
- k
- KilometerUnit of length equal to 1,000 meters. Equals 0.6214 statute miles.
- Kruskal-Wallis TestA test in inferential statistics, valid for all types of numerical data, that seeks to determine whether the observations in a sample came from one population as opposed to three or more distinct, homogeneous subpopulations. This test is used in assessment to analyze assessment ratios from three or more classes of property to determine whether significant assessment biases are present among the classes of property. When only two classes are being compared, the appropriate test is the Mann - Whitney test.
- l
- Land, ImprovedLand that has been made more valuable by the application of labor or labor and capital to it or public property adjacent to it.
- Land, Parcel ofSee parcel.
- Law of Variable ProportionsOften called law of decreasing returns or the law of proportionality. States that when the quantity of one productive service is increased by equal increments, the quantities of other productive services remaining fixed, the resulting increment of product will decrease after a certain point.
- Lease
- Legal DescriptionA delineation of dimensions, boundaries, and relevant attributes of a real property parcel that serve to identify the parcel for all purposes of law. The description may be in words or codes, such as metes and bounds or coordinates (see coordinate system). For a subdivided lot, the legal description would probably include lot and block numbers and subdivision name.
- LesseeThe person receiving a possessory interest in property by lease, that is, the owner of a leasehold estate.
- LessorThe person granting a possessory interest in property by lease, that is, the conveyor of a leasehold estate, the holder of a leased fee estate.
- Level of AppraisalThe common, or overall, ratio of appraised values to market values. Three concepts are usually of interest: the level required by law, the true or actual level, and the computed level, based on a ratio study.
- Level of Assessment; Assessment RatioThe common or overall ratio of assessed values to market values. Compare level of appraisal. Note: The two terms are sometimes distinguished, but there is no convention determining their meanings when they are. Three concepts are commonly of interest: what the assessment ratio is legally required to be, what the assessment ratio actually is, and what the assessment ratio seems to be, on the basis of a sample and the application of inferential statistics. When level of assessment is distinguished from assessment ratio, "level of assessment" usually means either the legal requirement or(...)
- Life, EconomicSee economic life.
- Life, PhysicalThe period over which a physical property is capable of functioning without being scrapped or reconstructed.
- Linear RegressionA kind of statistical analysis used to investigate whether a dependent variable and a set of one or more independent variables share a linear correlation and, if they do, to predict the value of the dependent variable on the basis of the values of the other variables. Regression analysis of one dependent variable and only one independent variable is called simple linear regression, but it is the word simple (not linear) that distinguishes it from multiple regression analysis with its multiple independent variables.
- Loan-To-Value Ratio (M)The relationship (usually as a percentage) between the amount of a mortgage and the value of the security pledged as security for the mortgage.
- Location Value Response Surface AnalysisA mass appraisal technique that involves creating value influence centers, computing variables to represent distances (or transformations thereof) from such points and using the variables in a multiple regression or other model to capture location influences. Implementation of the technique is enhanced by the use of a geographic information system. Some geographic information systems permit the value influence centers to be displayed and measured as a three-dimensional grid surface, the results of which can be likewise used in calibration techniques to arrive at the contribution of(...)
- Location VariableA variable, such as the distance to the nearest commercial district or the traffic count on an adjoining street, that seeks to measure the contribution of locational factors to the total property value.
- Locational ObsolescenceA component of economic obsolescence; loss in value due to suboptimal siting of an improvement.
- Log-Linear RelationshipA correlation between two variables such that if the value of one variable changes by a certain percentage, the value of the other changes by a certain amount. (Recall that logarithms permit multiplication to be done by means of adding logs.) For example, there is a log - Linear relationship between x and y in the following sequence:
- Logarithm; LogThe number that, when used as an exponent for another number (called the base), results in a third number of some practical interest (called the antilogarithm). There are two bases that are used with any frequency; the base 10 produces what are called common logarithms, and the base 2.71828 (e) produces what are called natural logarithms. For example, log (10)100 = 2; 10 =100. Logarithms were originally used to simplify complex calculations involving multiplications inasmuch as two numbers can be multiplied by adding their logarithms and taking the antilog of the result.
- Long-Lived ItemsItems that are the basic structure of a building and are not usually replaced during economic life. For example: foundation, roof structure, and framing.
- m
- MacroeconomicsThe economics of the economy as a whole the forces causing recession, depression, and inflation together with the forces resulting in economic growth.
- Mann-Whitney TestA test in inferential statistics, similar to the Kruskal - Wallis test, that seeks to determine whether the differences in values between two sets of observations from any population are statistically significant.
- MapA conventional representation, usually on a plane surface and at an established scale, of the physical features (natural, artificial, or both) of a part or the whole of the earth's surface. Features are identified by means of signs and symbols, and geographical orientation is indicated.
- Margin of ErrorA measure of the uncertainty associated with statistical estimates of a parameter. It is typically linked to consumer surveys or political poll questions. A margin of error is a key component of a confidence interval. It reports a "plus or minus" percentage or proportion quantity in a confidence interval at a specified level of probability (typically 95 percent). See confidence interval.
- Market(1) The topical area of common interest in which buyers and sellers interact. (2) The collective body of buyers and sellers for a particular product.
- Market Adjustment FactorsMarket adjustment factors, reflecting supply and demand preferences, are often required to adjust values obtained from the cost approach to the market. These adjustments should be applied by type of property and area and are based on sales ratio studies or other market analyses. Accurate cost schedules, condition ratings, and depreciation schedules will minimize the need for market adjustment factors.
- Market AnalysisA study of real estate market conditions for a specific type of property.
- Market AnalystAn appraiser who studies real estate market conditions and develops mathematical formulas that represent those market conditions.
- Market ApproachA valuation term with several meanings. In its broadest use, it might denote any valuation procedure intended to produce an estimate of market value, or any valuation procedure that incorporates market - Derived data, such as the stock and debt technique, gross rent multiplier method, and allocation by ratio. In its narrowest use, it might denote the sales comparison approach.
- Market Area(See Economic Area)
- Market PriceThe price a particular buyer and seller agree to in a particular transaction; the amount actually paid. Compare market value.
- Market-Related AdjustmentAccounts for changes in market conditions between the time a comparable sold and the effective date of the appraisal. See market adjustment factors.
- Market ValueMarket value is the major focus of most real property appraisal assignments. Both economic and legal definitions of market value have been developed and refined. A current economic definition agreed upon by agencies that regulate federal financial institutions in the United States is: The most probable price (in terms of money) which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is(...)
- MarketabilityThe salability of a property at a specific time, price, and terms.
- Mass AppraisalThe process of valuing a group of properties as of a given date, using standard methods, employing common data, and allowing for statistical testing.
- Mass Appraisal ModelA mathematical expression of how supply and demand factors interact in a market.
- MeanA measure of central tendency. The result of adding all the values of a variable and dividing by the number of values. For example, the (arithmetic mean) of 3, 5, and 10 is 18 divided by 3, or 6.
- Mean Absolute ErrorA measure of an AVM’s precision, mean absolute error is the average percentage error that the model exhibits when evaluating the properties in the test sample. However, analysts take the absolute value of the percentage error (i.e., the magnitude or size of the variance) instead of distinguishing between positive and negative error. For example, a mean absolute error of 8.75 percent indicates that, on average, the AVM’s valuations differ from the reference value by 8.75 percent.
- Mean ErrorThe average valuation error. Analysts calculate an AVM’s mean error by totaling the percentage of variance for each value estimate in the sample and dividing by the number of returned valuations. This metric indicates the extent to which an AVM tends to overvalue or undervalue subject properties. For example, a mean error of 2.5 percent suggests that, on average, the model’s valuations overestimate properties’ market values by 2.5 percent.
- MedianA measure of central tendency. The value of the middle item in an uneven number of items arranged or arrayed according to size; the arithmetic average of the two central items in an even number of items similarly arranged; a positional average that is not affected by the size of extreme values.
- Median Absolute DeviationThe median of the absolute deviations from the median. In a symmetrical distribution, the measure approximates one - Half the interquartile range.
- Median Absolute ErrorA measure of an AVM’s precision, median absolute error enables testers to determine the ‘middle’ degree of variation between an AVM’s outputs and the corresponding benchmarks. To calculate this metric, analysts take the absolute value of the percentage error (i.e., the magnitude or size of the variance) instead of distinguishing between positive and negative error. For example, a median absolute error of the 8.75 percent suggests that half of the model’s predictions are within 8.75 percent of the sale price (whether above or below) and half are outside of that range. As with measures of(...)
- Median ErrorA measure of AVM bias, or the extent to which an AVM tends to overvalue or undervalue subject properties. Analysts determine the median variance by sorting the percentage error for each valuation from lowest to highest. For samples with an odd number of results, the ‘middle’ percentage error represents the median error. In instances where there is an even number of results, the median is the average of the middle two percentage errors. A median error of 2.5 percent suggests that 50 percent of the AVM’s valuation errors will be greater than 2.5 percent and 50 percent of the model’s value(...)
- Median Percent DeviationThe median of the absolute percent deviations from the median; calculated by dividing the median absolute deviation by one - Hundredth of the median.
- MicroeconomicsThe economics of units, such as firms and neighborhoods, of an economic system (as opposed to macroeconomics, which studies the economy as a whole).
- Minkowski MetricAny of a family of possible ways of measuring distance. Euclidean distance, a member of this family, computes straight - Line distances by squaring differences in like coordinates, summing them, and taking the square root of the sum. In mass appraisal model building, Minkowski metric usually refers to the sum of absolute differences (not squared) in each dimension, and resembles a "taxicab" or city block pattern. Other alternatives are possible, including the distance as calculated only for the dimension of greatest difference, but the city block distance is most common.
- ModeA measure of central tendency. (1) In an array of the values of a variable, the most frequently occurring value. (2) By extension for grouped data, the class with the greatest number of observations.
- ModelRepresentation or description of a system, theory, process, workflow or other phenomenon (e.g. model of an atom, an economic model). A model may attempt to represent how a system or other phenomenon works or functions. For example, computer models are representations of the various relationships among events, processes or values. A model is made up of one or more Methods.
- Model CalibrationThe development of the adjustments or coefficients from market analysis of the variables to be used in an automated valuation model.
- Model Preference Table®A Model Preference Table® ranks AVMs approved for use in a particular geographic area based on specific performance criteria. The sequence determines how an automated platform will order valuations from these sequenced models. An MPT® can be an element of a cascade.
- Model specificationThe formal development of a model in a statement or equation, based on data analysis and appraisal theory.
- Model ValidationThe process of demonstrating that an AVM or other econometric model produces results that are valid for a given application. This process involves both evaluating the AVM’s theoretical underpinnings as well as the sufficiency of the vendor’s data management and model calibration efforts. Back-testing the AVM’s outputs against benchmark values is also an important component of model validation.
- Moving AverageA statistic used to smooth the values of a variable when those values are erratic over distance or time, as in the case of land values and mortgage commitments. For example, a five - Block simple moving average of land values along a major street would assign to block 16 the average of the values for blocks
- MulticollinearityCorrelation among two or more variables. In regression analysis, high multicollinearity among the independent variables complicates modeling and will compromise the reliability of the resulting coefficients. If the multicollinearity is perfect, the multiple regression algorithms simply will not work and either an error message may result or the software may purge one or more of the problem variables.
- Multiple Listing Service (MLS)A computerized database subscription service used by real estate brokers and agents to share information about properties for sale. Hundreds of systems are located throughout the U.S. and Canada to serve local market areas.
- Multiple Regression Analysis (MRA)A particular statistical technique, similar to correlation, used to analyze data in order to predict the value of one variable (the dependent variable), such as market value, from the known values of other variables (called “independent variables’), such as lot size, number of rooms, and so on. If only one independent variable is used, the procedure is called simple regression analysis and differs from correlation analysis only in that correlation measures the strength of the relationship, whereas regression predicts the value of one variable from the value of the other. When two or(...)
- Multiplicative modelsA mathematical model in which the coefficients of independent variables serves as powers (exponents) to which the independent variables are raised or in which independent variables themselves serve as exponents; the results are then multiplied to estimate the value of the dependent variable.
- Multiplicative TransformationA transformation of a set of variables accomplished by multiplying a variable by one or more other variables. For example, room area is a multiplicative transformation of length and width.
- Multivariate Statistical TechniqueAny of a number of statistical analyses in which data (such as the information on a single property record card) containing a number of variables (such as lot size, number of rooms, and construction type) are analyzed to predict the value of some other variable. See multiple regression analysis.
- n
- Natural LogarithmSee logarithm.
- Neighborhood(1) The environment of a subject property that has a direct and immediate effect on value. (2) A geographic area (in which there are typically fewer than several thousand properties) defined for some useful purpose, such as to ensure for later multiple regression modeling that the properties are homogenous and share important locational characteristics.
- Neighborhood AnalysisA study of the relevant forces that influence property values within the boundaries of a homogenous area.
- Net Assessed ValueThe official dollar value remaining on an assessment roll after deducting the amount of any applicable partial exemptions from the gross assessed value.
- Neural Network (ANN)A collection of mathematical models that emulate some of the observed properties of biological nervous systems and draw on the analogies of adaptive biological learning. An artificial neural network has several key elements: input, processing (calibration), and output. Other names associated with neural networks include connectionism, parallel distributed processing, neuro - Computing, natural intelligent systems, and machine learning algorithms.
- Non- sampling ErrorThe error reflected in ratio study statistics from all sources other than sampling error. While the non-sampling error is unavoidable due to the inefficiencies inherent in real property markets, the imperfections of the appraisal process, and the imperfections of conducting ratio studies, all practicable steps must be taken to minimize nonsampling error in ratio studies.
- Nonconforming Use(1) A use of property that does not comply with the applicable zoning ordinance. (2) Uses that differ noticeably from prevailing uses in a neighborhood are sometimes also referred to as "nonconforming."
- Nondisclosure StatesStates that do not disclose sales prices when county clerks real estate transactions. Unless a vendor has access to market data from an alternative source, AVM performance generally suffers in nondisclosure states. There are currently twelve nondisclosure states - Alaska, Idaho, Kansas, Louisiana, Mississippi, Missouri, Montana, New Mexico, North Dakota, Texas, Utah and Wyoming.
- Nonparametric StatisticA statistic whose interpretation or reliability does not depend on the distribution of the underlying data.
- Nonsampling ErrorThe error reflected in ratio study statistics from all sources other than sampling error. While nonsampling error is unavoidable due to the inefficiencies inherent in real property markets, the imperfections of the appraisal process, and the imperfections of conducting ratio studies, all practicable steps must be taken to minimize nonsampling error in ratio studies.
- Normal DistributionA theoretical distribution often approximated in real-world situations. It is symmetrical and bell-shaped; 68 percent of the observations occur within one standard deviation of the mean, and 95 percent within two standard deviations.
- Null HypothesisA hypothesis that one chooses to accept in the absence of sufficient evidence to the contrary.
- NumeratorIn a fractional expression, the number that is divided by some other number (the denominator). For example, 3 is the numerator of the fraction 3/4, 4 is the denominator.
- o
- Object of Tax(1) The objective element on which a tax is imposed. (2) The aims or purposes for which the tax is designed. Note: This term, as defined in (1) above, does not seem to be distinguished adequately from "measure of tax," "subject of tax," and "tax base." Such distinction as can be drawn is pedantic, and the use of the term in this sense is not recommended. It is also recommended that the term "purpose of tax" be substituted for the second usage given above. Compare measure of tax; subject of tax; tax base.
- Objective DataObjective data are variables for which the correct value can be verified. Examples include zoning, corner lot (yes or no), land area, and front feet.
- ObservationOne recording or occurrence of the value of a variable, for example, one sale ratio among a sample of sales ratios.
- ObsolescenceA decrease in the value of a property occasioned solely by shifts in demand from properties of this type to other types of property and/or to personal services. Some of the principal causes of obsolescence are (1) changes in the esthetic arts; (2) changes in the industrial arts, such as new inventions and new processes; (3) legislative enactments; (4) change in consumer demand for products that results in inadequacy or over- adequacy; (5) migration of markets that results in misplacement of the property. Contrast depreciation, physical; depreciation, economic.
- OccupancyThe act of taking or holding possession of property.
- Opportunity CostThe principle that the cost of a resource for one use is the value of the resource in its best alternative use.
- OutlierInstances of extreme undervaluation or overvaluation compared against a known value.
- OutliersObservations that have unusual values, that is, they differ markedly from a measure of central tendency. Some outliers occur naturally; others are due to data or modeling errors.
- Outputs(1) Goods produced by a firm. (2) The information returned by a computer to its user.
- OverimprovementAn improvement whose cost exceeds the cost of an alternative improvement by more than the excess of the present worth of the given improvement and the land over the present worth of the alternative improvement and the land, often because a structure is too large or too costly for the most profitable use of the site. Contrast underimprovement.
- OwnershipThe rights to the use of property, to the exclusion of others.
- p
- ParallaxThe apparent displacement of position of a body with respect to a reference point or system of coordinates, caused by moving the point of observation.
- ParameterNumerical descriptive measure of the population, for example, the arithmetic mean or standard deviation. Parameters are generally unknown and estimated from statistics calculated from a sample of the population.
- Parametric StatisticA statistic whose interpretation or reliability depends on the distribution of the underlying data.
- ParcelA contiguous area of land described in a single legal description or as one of a number of lots on a plat; separately owned, either publicly or privately; and capable of being separately conveyed.
- Parcel Identification NumberA numeric or alphanumeric description of a parcel that identifies it uniquely. Assessors use various systems, many with common features. A growing number of these systems include geocoding. In the thirty states where it exists, the Public Land Survey System, authorized by the United States Government in 1785, is often a basis for parcel identification.
- Partial Equilibrium AnalysisAn analysis of one unit of the economy in light of constraints imposed by economic forces outside the unit. An example would be a highest and best use analysis of vacant land where the land use is limited by zoning.
- Partial InterestAn interest (in property) that is less complete than a fee simple interest.
- Percent Predicted Error (PPE) BucketAn AVM Performance Metric that measures a combination of accuracy and precision. The PPE is the percentage of properties for which the AVM predicts selling prices to within +/- a given percentage. The complement of the Failure Rate.
- Percentage ErrorThe building block of all accuracy-related performance metrics. Analysts calculate percentage error in the following manner: Percentage Error = (AVM Value – Benchmark Value x 100%) / Benchmark Value
- PercentileThe values that divide a set of data into specified percentages when the data are arrayed in ascending order. The tenth percentile includes the lowest 10 percent of the values, the twentieth percentile includes the lowest 20 percent of the values, and so forth.
- Physical DeteriorationA cause of depreciation that is a loss in value due to ordinary wear and tear and the forces of nature.
- PlatformA software solution that automates an organization’s AVM selection rules and valuation acceptance criteria. This technology is particularly useful for implementing a cascade and ensuring enterprise-wide compliance with collateral valuation policies.
- Point EstimateA single numerical value that can be used to estimate a population parameter. It is calculated on the basis of information collected from a sample. Point estimates are generally constructed to provide the best unbiased estimate of the population parameter consistent with the sample data. However, the point estimate is only an estimate and is unlikely to have the same value as the population parameter. (See confidence interval and reliability for discussion of precision of the sampling process.)
- PolygonA line chart.
- Pooled RegressionCombining two or more strata to form one regression model.
- PopulationAll the items of interest, for example, all the properties in a jurisdiction or neighborhood; all the observations in a data set from which a sample may be drawn.
- Position Hit RateThe hit rate for an AVM that is in a second or subsequent position within an AVM cascade expressed as the percentage of AVM valuations returned relative to the number of properties submitted to that AVM (i.e., those properties where the preceding AVM(s) did not return a usable value).
- PRBSee Price-related bias. Also see Price-related differential (PRD).
- PRDSee Price-related differential.
- PrecisionThe dispersion of a model’s valuation errors, with greater dispersion being considered less precise, and lower dispersion being considered more precise. Mean and median absolute error, standard deviation and forecast standard deviation are all measures of an AVM’s precision.
- PRESS Predicted ValueThe Predicted Residual Sum of Squares (PRESS) predicted value is the (regression) model’s predicted value of the ith observation in the training dataset, obtained by fitting the original regression model with the ith observation withheld.
- PriceThe amount asked, offered, or paid for a property. (See USPAP for additional comments.)
- Price, Adjusted SaleThe sale price that results from adjustments made to the stated sale price to account for the effects of time, personal property, atypical financing, and the like.
- Price-Related Bias (PRB)A measure of AVM precision. The PRB is the slope in the regression of the AVM valuation-to-sales price ratios (adjusted by the median ratio) on a proxy variable that measure the value of the house. The proxy value variable is the natural log of the average of selling price and AVM valuation (all divided by 0.693). The PRB coefficient shows whether an AVM's valuation-to-sales price ratios are systemactially higher, lower or steady as values increase. A negative value indicates regressivity, while a positive value indicates progressivity.
- Price-Related Differential (PRD)The PRD is mean (valuation-to-selling price) ratio divided by the weighted (by selling prices) mean ratio. The PRD assesses the level of uniformity in AVM valuation-to-sales price ratios between low and high values properties. The statistic has a slight bias upward. Price-related differentials above 1.03 tend to indicate assessment regressivity; Price-related differentials below 0.98 tend to indicate assessment progressivity. Used as a measure of AVM precision.
- Price, Sale(1) The actual amount of money exchanged for a unit of goods or services, whether or not established in a free and open market. An indicator of market value. (2) Loosely used synonymously with "offering" or "asked" price. Note: The sale price is the "selling price" to the vendor and the "cost price" to the vendee.
- Principle of ChangeThe principle of change asserts that all markets are in a continual state of change. According to this principle, properties generally go through the three stages of integration (development), equilibrium (stasis), and disintegration (decline).
- Principle of ConformityThe principle of conformity states that the value of a group of properties will rise to its highest possible level in an area where architectural styles are reasonably homogenous and surrounding land uses are compatible with the use of the specified properties.
- Principle of ContributionThe principle of contribution requires an appraiser to measure the value of any improvement to a property by the amount it contributes to market value, not by its cost.
- Principle of ProgressionThe principle of progression holds that the worth of an inferior property is increased by its proximity to better properties of the same use class.
- Principle of SubstitutionThe principle of substitution states that no buyer will pay more for a good than he or she would have to pay to acquire an acceptable substitute of equal utility in an equivalent amount of time.
- Progressivity
- Property(1) An aggregate of things or rights to things. These rights are protected by law. There are two basic types of property: real and personal. (2) The legal interest of an owner in a parcel or thing (see bundle of rights).
- Property Residual TechniqueA technique used to estimate the value of a property from a knowledge of its net operating income, discount rate, remaining economic life, the amount of the reversion, and the income path attributable to the property over the holding period (generally the remaining economic life of the property). The technique estimates total value by discounting anticipated income and adding the result to the present worth of the reversion.
- Property RightsSee bundle of rights.
- Property Tax BaseSee assessment base.
- Property Tax PolicyAny purposeful course of action by governmental bodies that affects or determines the way property taxes are created, levied, collected, or spent. Property tax policy issues can include determining the division of responsibility between local and state/provincial governments, equalization, appeals, public relations, reappraisal systems, the market value standard, exemptions and abatements, fractional assessments (ratios), and limits on taxes and assessed values.
- Property TaxesSee tax, general property; tax, property; tax, special property.
- Property Use CategoryA United States Census Bureau classification scheme based on actual utilization of real property. There are seven classes of real property: Acreage (or "Acreage and Farms") - Includes farms, timberland, recreational acreage, idle land, and waste land in rural locations. Excludes vacant platted lots that lie within or adjacent to a municipality and that usually carry a lot/block system designation rather than acreage. Separately assessed timber or mineral rights are omitted from this category. Commercial Property - Generally any nonindustrial, nonresidential realty of a commercial(...)
- Proposition 13 StatesStates where the tax assessment value is based on the acquisition price rather than the property’s current market value. Tax assessment models do not work in these states.
- q
- Qualified SaleA property transfer that satisfies the conditions of a valid sale and meets all other technical criteria for inclusion in a ratio study sample. If a property has undergone significant changes in physical characteristics, use, or condition in the period between the assessment date and sale date, it would not technically qualify for use in ratio study.
- Qualitative DataPertaining to the subjective nature of some variable of interest. For example, view, fire protection, quality, or site/location.
- Qualitative VariableSomething that can be appreciated but not objectively reduced to an unambiguous scale. For example, view is a qualitative variable.
- Quality ClassA subjective classification of a structure by an appraiser, intended to describe materials used, workmanship, architectural attractiveness, functional design, and the like. Quality class, or its synonym "grade," is the key variable in most cost schedules.
- Quantitative VariablePertaining to the objective nature of some variable of interest, that is, something that can be measured or counted with little ambiguity. For example, number of bathrooms is a quantitative variable.
- QuartilesThe values that divide a set of data into four equal parts when the data are arrayed in ascending order. The first quartile includes the lowest quarter of the data; the second quartile, the second lowest quarter, and so forth.
- Quotient TransformationA transformation of two or more variables accomplished by dividing one by the other. For example, the length of a room is a quotient transformation of its area and its width. Like the multiplicative transformation, many useful quotient transformations are less intuitively obvious than the one in the example given.
- r
- RadiusThe radius of the circle that encompasses all of the Comps to indicate the relative distance of the Comps to one another and the Subject Property.
- Random SampleA sample for which each item of the population has an equal chance of being included and, by extension, each possible combination of n items has an equal chance of occurrence.
- Range(1) The maximum value of a sample, minus the minimum value. (2) The difference between the maximum and minimum values that a variable may assume.
- Rank(1) The position of an item relative to others in a set ordered according to the value of each member of the set in relation to the others. (2) The act of ordering the members of a set according to the value of each member in relation to the others. For example, the numbers 0.95, 0.87, 1.09, and 0.83 have ranks of 3, 2, 4, and 1. See Spearman rank test.
- Ratio StudyA study of the relationship between appraised or assessed values and market values. Indicators of market values may either be sales (sales ratio study) or independent “expert” appraisals (appraisal ratio study). Of common interest in ratio studies are the level and uniformity of the appraisals and assessments.
- RCNReplacement cost new or reproduction cost new.
- RCNLDReplacement cost new less depreciation or reproduction cost new less depreciation.
- Real EstateThe physical parcel of land and all improvements permanently attached. Compare real property.
- Real Estate AppraisalAccording to the federal banking agencies’ appraisal regulations, a real estate appraisal must comply with USPAP (unless safety and soundness requires adherence to stricter standards); be written and contain sufficient information for the lender to engage in the transaction; contain an estimate of market value; and be performed by a state-licensed or state-certified appraiser.
- Real Estate EvaluationFor certain transactions (e.g., those that are below the de minimis), the federal banking regulators allow lending institutions under their jurisdiction to obtain a real estate evaluation in lieu of an appraisal. According to the “Interagency Appraisal and Evaluation Guidelines,” evaluations must include the effective date of the valuation; describe the real estate collateral, its condition, as well as its current and projected use; describe the information source(s) used in the analysis; describe the analysis and supporting information; and provide an estimate of the real estate’s(...)
- Real Estate Transfer DocumentsThe various kinds of deeds whereby real property is conveyed. Compare conveyances.
- Real PropertySee property.
- Real TimeTo make images or data available for inspection simultaneously with their acquisition.
- Realty(1) Any tangible thing whose fee ownership constitutes real property, that is, land or improvements. (2) A synonym for real estate.
- ReciprocalThe result obtained when 1 is divided by a given number. For example, the reciprocal of 4 is 0.25. Factors are reciprocals of rates.
- ReconciliationThe final step in the valuation process wherein consideration is given to the relative strengths and weaknesses of the three approaches to value, the nature of the property appraised, and the quantity and quality of available data in formation of an overall opinion of value (either a single point estimate or a range of value). Also termed "correlation" in some texts.
- Reference Type/Benchmark TypeThe source of the Reference Value (e.g. 1004, 2055, sales price).
- Reference ValueThe value against which the AVM predicted value will be compared against.
- Regression AnalysisSee multiple regression analysis.
- Regression CoefficientThe coefficient calculated by the regression algorithm for the data supplied that, when multiplied by the value of the variable with which it is associated, will predict (for simple regression) or help to predict (for multiple regression) the value of the dependent variable. For example, in the equation, Value = $10,000 + $5,000 × number of rooms, $5,000 is a regression coefficient.
- Regression LineThe line on a graph that represents the relationship defined by the regression coefficients. For example, the line from the relationship given in the definition of regression coefficient would cross the y - Axis at the value $10,000 and would go up $5,000 for each movement of 1 to the right. This example illustrates one of the subtleties required in understanding regression analysis: in fact, there is no line, because the independent variable is not a continuous variable, but it is easier to talk about the relationship by pretending that the variable is continuous and represent the(...)
- RegressivitySee assessment progressivity (regressivity).
- Regressivity IndexSee price - Related differential.
- REITReal estate investment trust; combines capital of many investors to acquire or finance real estate through formation of a corporation whose shares are traded in a market.
- RelationshipThe phenomenon whereby knowledge of the value of one variable tells you something about the probable value of another. (See correlation.) Relationships may be positive (an increase in the value of one variable implies an increase in the value of the other variable) or negative (a change in the value of one variable implies a change in the other direction for the value of the other variable). Independence of two variables means that there is no relationship between them.
- ReliabilityIn a sampling process, the extent to which the process yields consistent population estimates. Ratio studies typically are based on samples. Statistics derived from these samples may be more or less likely to reflect the true condition in the population depending on the reliability of the sample. Representativeness, sample size, and sample uniformity all contribute to reliability. Formally, reliability is measured by sampling error or the width of the confidence interval at a specific confidence level relative to the central tendency measure.
- Remaining Economic Life (REL)As of the appraisal date, the number of years in the future over which the operation of an asset is anticipated to be economically feasible; often expressed as a percentage of the total economic life (REL %).
- RemodelTo improve a structure by changing its floor plan, functions, or characteristics.
- Repeat Sales Analysis ModelRepeat Sales analysis aggregates changes in value and statistical means for properties sold more than once during a specified period of time in a given geographic area. For example, in a zip or postal code area, estimate market-level housing price changes. If an individual property has not been substantially changed since its last sale, this analysis matches each pair of sales transactions (thus the name "repeat sales"). The amount of appreciation (or depreciation) is calculated from the time of the first sale to the second and so on, providing an estimate of the overall appreciation of(...)
- Repeat Sales IndexRepeat sales models examine the sales prices of the same property at two (or more) points in time, thus accounting for the affects that spatial factors and individual property characteristics have on market value. Examples include the OFHEO’s House Price Index and the S&P/Case-Shiller® Home Price Indices.
- Replacement Cost New Less Depreciation (RCNLD)In the cost approach, replacement cost new less physical incurable depreciation.
- Replacement Cost; Replacement Cost New (RCN)The cost, including material, labor, and overhead, that would be incurred in constructing an improvement having the same utility to its owner as a subject improvement, without necessarily reproducing exactly any particular characteristics of the subject. The replacement cost concept implicitly eliminates all functional obsolescence from the value given; thus only physical depreciation and economic obsolescence need to be subtracted to obtain replacement cost new less depreciation (RCNLD).
- Representative SampleA sample of observations from a larger population of observations, such that statistics calculated from the sample can be expected to represent the characteristics of the population being studied.
- Residence(1) A domicile. (2) A domicile at which a person is actually dwelling. (3) A dwelling place, whether or not it constitutes a domicile (preferred). Note: Ordinarily, in the law of taxation, "residence" means "domicile" unless a contrary meaning is specified or is indicated by the context.
- Residential (nonfarm) MultifamilySee Property.
- Residential (nonfarm) Single FamilySee Property.
- Residential PropertyReal property that might be vacant land or an improved parcel of land devoted to or available for residential use. See property use category.
- ResidualThe difference between an observed value and a predicted value for a dependent variable.
- Residual TechniqueA method of arriving at the unknown value of a property component by subtracting the known values of other components from a known overall value.
- Residual ValueThe value of the property after cleanup of environmental contamination. This may be more or less than the original value depending on counterbalancing effects of stigma and improvements to plant efficiency.
- Result CodeMost AVMs return a result code that explains the outcome of each submission. For instance, result codes should identify when a successful valuation was returned, why a valuation was obtained but not returned (e.g., the value fell below the model’s minimum confidence score thresholds), or why a valuation was not obtained (e.g., ‘unable to verify address’ or ‘invalid property type’).
- Retrospective (“Retro”) ValuationEstimate of Value for subject property at a point in time in the past utilizing data prior to a specified date of stated value.
- Root Mean Square (RMS)The square root of the average value of the sum of the squares of the differences between values in a set and the corresponding values that have been accepted as correct or standard. Used to measure map accuracy.
- s
- Sale, Arm's-LengthA sale in the open market between two unrelated parties, each of whom is reasonably knowledgeable of market conditions and under no undue pressure to buy or sell.
- Sale, ConditionalA sale, especially of chattels, in which the transfer of title is made to depend on the performance of a condition subsequent to the making of the sales contract and delivery of goods. Note: The most common condition is that the remainder of the purchase price be paid. Property held under a conditional sales contract may be repossessed without foreclosure proceeding, and the former holder has no equity of redemption. Compare mortgage, chattel.
- Sale, DistressA sale made to meet the immediate and pressing needs of the seller at whatever price the property will bring.
- Sale, ForcedA sale made pursuant to law; usually an auction sale that is involuntary on the part of the owner.
- Sale-LeasebackA sale and subsequent lease given by the buyer back to the seller as part of the same transaction.
- Sale, NormalA sale in which neither the buyer nor the seller acts under legal or economic compulsion, in which both parties are reasonably well informed, and in which both are primarily actuated by economic motives. Compare value, market and sale, arm's length.
- Sale of ConvenienceA sale designed to correct defects in a title, create a joint or common tenancy, or serve some similar purpose. Such sales generally are transacted at only a nominal price.
- Sale Price
- Sale Price-Assessment RatioThe reciprocal of the assessment sale price ratio.
- Sale TermsThe amount of down payment, the interest on the mortgage, and information on points and other fees involved in a real estate sale. Also called "terms of financing" or "financing terms."
- Sales ComparisonOne of the three approaches to value, the sales comparison approach estimates a property’s value (or some other characteristic, such as its depreciation) by reference to comparable sales.
- Sales Data(1) Information about the nature of the transaction, the sale price, and the characteristics of a property as of the date of sale. (2) The elements of information needed from each property for some purpose, such as appraising properties by the direct sales comparison approach.
- Sales Ratio/Assessment RatioThe ratio of an appraised (or assessed) value to the sale price or adjusted sale price of a property. See "Assessment-sale price ratio."
- Sales Ratio StudyA ratio study that uses sale prices as proxies for market values.
- Sales Tier AnalysisA comparison of the percent sales errors (or another metric) after creating price bins or tiers. These stratified price bins may be chosen using specific monetary values or they can be chosen to provide (roughly) equal numbers of sales in each bin.
- SampleActual properties submitted to an AVM Vendor for evaluation. Subset of Population.
- Sample SizeThe number of properties submitted to the AVM Vendor for valuation.
- Sampling ErrorThe error reflected in ratio study statistics that results solely from the fact that a sample of the population is used rather than a census of the population.
- Scatter Diagram or ScatterplotA graphic means of depicting the relationship or correlation between two variables by plotting one variable on the horizontal axis and one variable on the vertical axis. Often in ratio studies it is informative to determine how ratios are related to other variables. A variable of interest is plotted on the horizontal axis, and ratios are plotted on the vertical axis.
- Short-Lived ItemsItems of a structure that have a shorter life than the basic structure. For example, roofing, water heaters, floor covering, and interior finish.
- SignificanceA measure of the probability that an event is attributable to a relationship rather than merely the result of chance.
- SiteThe location of a person, thing, or event.
- Site AmenitiesThe specific location-related positive attributes of a property: topography, utilities, street traffic, view, and so on.
- Site AnalysisA study that determines the suitability of a specific parcel of land for a specific purpose.
- Site Characteristics(1) Characteristics of (and data that describe) a particular property, especially land size, shape, topography, drainage, and so on, as opposed to location and external economic forces. (2) By extension, any characteristics of either the site or the improvement.
- Site DevelopmentImprovements made to a land site (for example, grading, utility installation, roadways, and curbs) before a building is constructed.
- SitusThe actual or assumed location of a property for purposes of taxation. In personal property, situs may be the physical location of the property or, in the instance of highly mobile property, the more - Or - Less permanent location of the property owner.
- SkewedThe quality of a frequency distribution that makes it asymmetrical. Distributions with longer tails on the right than on the left are said to be skewed to the right or to be positively skewed; distributions with longer tails to the left are said to be skewed to the left or to be negatively skewed.
- SlopeThe change in the dependent variable associated with a change of one in the independent variable of interest. The slope is given by the coefficient of the independent variable.
- Soft Benchmark ValuesBenchmark values used to monitor an AVM or AVM cascade’s performance in the production environment. Because actual sales prices may not be available for these properties, lenders use ‘soft’ value such as pre-closing sales prices, borrowers’ estimates of value, an appraisal, or the results of a desktop or field review to track general trends in an AVM’s predictive accuracy.
- SoftwareAnything that is stored electronically on a computer is software. The storage device is hardware. There are two general categories of software, operating systems and the utilities that allow the computer to function, and applications, programs that allow users to work with the computer, e.g. word processing, spreadsheets, databases, AVMs.
- SpatialRefers to the location of, proximity to, or orientation of objects with respect to one another in N - Dimensional space. Generally refers to phenomena that can be mapped in two or three dimensions on or near the earth's surface.
- Spearman Rank TestA standard nonparametric test is useful in examining assessment bias, among other things. It is based on the correlation of two sets of ranks.
- Square FootA unit of area equal to a square one foot in length on each side.
- Standard 6See Uniform Standards of Professional Appraisal
- Standard DeviationAnalysts frequently measure the dispersion of valuation error in terms of a standard deviation, a common statistical formula which measures how tightly these variances are clustered around the mean percentage error. If the distribution of an AVM’s valuation errors follows a normal bell-shaped curve, then roughly 68 percent of its value estimates will fall within plus or minus one standard deviation of the mean-variance. A lower standard deviation indicates a tight concentration around the mean-variance; an elevated standard deviation suggests that the model performs inconsistently.
- Standard ErrorA measure of the precision of a measure of central tendency; the smaller the standard error, the more reliable the measure of central tendency. Standard errors are used in calculating a confidence interval about the arithmetic mean and the weighted mean.
- Standard Error of the Estimate (SEE)An expression for the standard deviation of the observed values about the regression line; thus it provides an estimate of the variation likely to be encountered in making predictions from the regression equation.
- Standardize(1) To transform a variable to standard form; that is, to make the mean of the frequency distribution equal to zero and the standard deviation equal to one. (2) To adjust, for appraisal purposes, reported data such as income and expenses, so as to remove the effects of non - Real estate factors, such as abnormally good or bad management, weather, and the like. The more common term for this adjustment process is "normalization."
- Statistical AccuracyThe closeness between the statistical estimate and the true (but unknown) population parameter value it was designed to measure. It is usually characterized in terms of error or the potential significance of error and can be decomposed into sampling error and nonsampling error components. Accuracy can be specified by the level of confidence selected for a statistical test. See accuracy.
- Statistical PrecisionA reference to how closely the survey results from a sample can reproduce the results that would be obtained from the entire population (a complete census). The amount by which a sample statistic can vary from the true population parameter is due to error. Even if all the sample data are perfectly accurate, random (sampling) error affects statistical precision (measured by the standard error or standard deviation). The dispersion of ratios in the population and the sample size have a controlling influence over the precision of any statistical estimate. When the reliability of a(...)
- Statistics(1) Numerical descriptions calculated from a sample, for example, the median, mean, or coefficient of dispersion. Statistics are used to estimate corresponding measures, termed parameters, for the population. (2) The science of studying numerical data systematically and of presenting the results usefully. Two main branches exist: descriptive statistics and inferential statistics.
- Stepwise RegressionA kind of multiple regression analysis in which the independent variables enter the model, and leave it if appropriate, one by one according to their ability to improve the equation’s power to predict the value of the dependent variable.
- Stepwise Regression AnalysisA kind of multiple regression analysis in which the independent variables enter the model, and leave it if appropriate, one by one according to their ability to improve the equation's power to predict the value of the dependent variable.
- StigmaA perception that a property continues to be contaminated even though it has been cleaned up. Stigma may affect property value.
- StratificationThe division of a sample of observations into two or more subsets according to some criterion or set of criteria. Such a division may be made to analyze disparate property types, locations, or characteristics, for example.
- StratifyTo divide, for purposes of analysis, a sample of observations into two or more subsets according to some criterion or set of criteria.
- Subject PropertyThe property being valued.
- SubjectiveHaving the quality of requiring judgment in arriving at an appropriate answer or value for a variable (such as the quality class of a structure). See objective; qualitative variable; quantitative variable.
- Subjective DataSubjective data are items for which the proper value is a matter of judgment and more difficult to verify. Examples include construction class, condition, effective year built, neighborhood desirability, and view.
- SubsetA group of properties within a sample, smaller than the sample, usually although not necessarily defined by stratification rather than by sampling.
- SubstitutionThe appraisal principle that states that a potential owner will pay no more for a property than the amount for which a property of like utility may be purchased; that a property's value tends to be set by the cost of acquiring an equally desirable substitute.
- Sum of Squared ErrorsThe sum of the squared deviations from the predicted values (rather than the mean value).
- Sum of SquaresThe result obtained by adding all the squares of the individual deviations from some given value. Usually it is the sum of the squares of the deviations of the individual values of a variable from the mean value.
- SuperadequacyA feature of a property exceeding in quality or amount the corresponding feature in a typical property of the same use. Superinsulation is one example. Superadequacies fall into the larger category of functional obsolescence.
- SuperpositioningThe capability of overlaying, normally an aerial image and a line map, for the purpose of data collection or data maintenance.
- t
- t-StatisticA particular statistic important in inferential statistics for certain kinds of hypothesis testing of certain kinds of data.
- t-TestA particular parametric statistical test useful, among other things, in testing the level of assessment.
- Table, DepthSee depth table.
- Tangible Property; TangiblesSee property.
- TaxA compulsory charge levied by a government unit against the income or property of a person, natural or corporate, for the common benefit of all citizens. The term does not include specific charges made against particular persons or property for current or permanent benefits and privileges accruing only to those paying such charges, such as licenses, permits, and specific assessments.
- Tax, Ad ValoremA tax levied on a base that is measured by value. Note: This term is often used to refer only to property taxes or to general property taxes, although technically it is applicable to income taxes, ad valorem tariffs, special property taxes, and so on. Contrast tax, specific.
- Tax AssessedA Valuation Method that provides an estimate of value as a function of the tax assessed value by applying a multiplier or other adjustment to the tax assessed value.
- Tax Assessed Value ModelDerive an estimate of value by examining market values attributed to properties by the local taxing authorities. As a matter of local law and custom, the values reported by the taxing authorities often (but not always) vary from the current market value in some reasonably predictable manner. For example, some jurisdictions require the taxing authority to report the value at 25 percent of estimated market value. In others, values are reassessed only on an infrequent basis. Some jurisdictions report multiple values - Assessed, appraised, and market values. By examining local laws and(...)
- Tax Assessment ModelsTax assessment models estimate market value based on local taxing authorities’ annual (often less than annual) evaluations of properties located within their jurisdictions. These models do not function in Proposition 13 states.
- Tax, BettermentSee assessment, special.
- Tax BurdenEconomic costs or losses resulting from the imposition of a tax. Burden can be determined only by detailed economic analysis of all economic changes resulting from the tax. In popular usage, the term often refers to the initial incidence rather than to ultimate economic costs.
- Tax District(1) In general, a state or any political subdivision thereof having or exercising the power to levy taxes. (2) As applied to property taxes, any area, whether coterminous with or within a state or a political subdivision thereof, within which the tax rate levied by such state or political subdivision is required by law to be uniform on properties of the same class.
- Tax, General PropertyOriginally, an ad valorem property tax that, in contemplation of law, was administered uniformly with respect to all tangible and intangible property (with the exception of a few classes specifically exempt) and that involved a uniform rate throughout each tax district. (2) Currently, the remnants of such a tax after its continued curtailment through classification, exemptions, use-value assessment laws, and special property tax laws applicable to various types of personal property. Compare tax, special property; tax, classified property.
- Tax, PropertyAny tax that is imposed on persons on account of their ownership or possession of property and is measured by the number of units, the value, or some presumptive evidence of number of units or value, of such property. Note: This tax is generally, but not necessarily, intended to be a direct, proportional ad valorem tax. Compare tax, general property; tax, special property; tax, classified property.
- Tax, ProportionalA tax in which the effective tax rate is the same for all taxpayers regardless of the sizes of the tax bases on which they are subject to taxation. Contrast tax, progressive; tax, regressive.
- Tax Rate(1) The amount of tax stated in terms of a unit of the tax base, for example, 30 mills per dollar, 2 percent, 2 cents per gallon. (2) For the property tax, the percentage of assessed value at which each property is taxed in a given district. Distinguish between effective tax rate and nominal tax rate.
- Tax, Regressive(1) A tax in which the effective rate is higher for a taxpayer subject to taxation on a small tax base than for a taxpayer subject to taxation on a large tax base. (2) Loosely used to refer to any tax that absorbs a smaller proportion of the wealth or income of the well - To - Do classes than of the poorer classes. Note: A tax is said to be regressive in administration, though not legally regressive, when the ratio of the actual base to the statutory base declines as the statutory base increases, in such manner as to nullify a proportional statutory rate or to make a progressive(...)
- Tax RollAn official list showing the amount of taxes charged against each taxpayer and/or each property within the jurisdiction of a tax district. Note: In property taxation, the tax roll is sometimes combined with the assessment roll into a single document.
- Three Approaches to ValueA convenient way to group the various methods of appraising a property. The cost approach encompasses several methods for estimating replacement cost new of an improvement less depreciation plus land value. The sales comparison approach estimates values by comparison with similar properties for which sale prices are known. The methods included in the income approach are based on the assumption that value equals the present worth of the rights to future income.
- Time-Adjusted Sale PriceThe price at which a property sold, adjusted for the effects of price changes reflected in the market between the date of sale and the date of analysis.
- Time Series AnalysisA family of techniques that can be used to measure the cyclical movements, random variations, seasonal variations, and secular trends observed over a period of time.
- ToleranceAn acceptable margin of error or inaccuracy.
- Topographic MapRefers to the basic description and elevation of a piece of land.
- TopographyThe contour of land surface, for example, gently rolling, mountainous, or flat.
- Total Economic LifeThe period of time or units of production over which the operation of an asset is economically feasible, not necessarily the same as its physical life.
- Training DatasetThe dataset used to fit (estimate the parameters of) a model (AVM). See also "Sample," "Representative Sample" and "Population."
- Transaction TypeThe transaction associated with the Reference Value (e.g. purchase, cash-out refinance, rate-term refinance).
- TrendingAdjusting the values of a variable for the effects of time. Usually used to refer to adjustments of assessments intended to reflect the effects of inflation and deflation and sometimes also, but not necessarily, the effects of changes in the demand for microlocational goods and services.
- Trending FactorA figure representing the increase in cost or selling price over a period of time. Trending accounts for the relative difference in the value of a dollar between two periods.
- Trimmed MeanThe arithmetic mean of a data set identified by the proportion of the sample that is trimmed from each end of the ordered array. For example, a 10 percent trimmed mean of a sample of size ten is the average of the eight observations remaining after the largest and smallest observations have been removed.
- Two-Tailed TestA test in which the alternative hypothesis does not specify the direction of the relationship, as opposed to a one-tailed test, in which the direction of relationship is specified. For example, the alternative hypothesis that "A does not equal B" implies a two - Tailed test, whereas "A is greater than B" implies a one-tailed test. See Null Hypothesis.
- u
- U-TestSee Mann-Whitney test.
- UnderimprovementAn improvement that does not develop a site to its highest and best use; usually a violation of the principle of conformity. Contrast overimprovement.
- Uniform Standards of Professional Appraisal PracticeAnnual publication of the Appraisal Standards Board of The Appraisal Foundation: "These Standards deal with the procedures to be followed in performing an appraisal, review or consulting service and the manner in which an appraisal, review or consulting service is communicated. . . .Standard 6 sets forth criteria for the development and reporting of mass appraisals for ad valorem tax purposes or any other universe of properties" (p. 1).
- Unweighted MeanA mean in which each value is considered only once. See weighted mean.
- Usable Hit RateThe percentage of valuations returned by an AVM that meet the organization’s predetermined acceptance criteria - usually related to predictive accuracy or confidence score. For example, suppose a user defines a successful valuation as a value estimate that is within plus or minus 15% of its corresponding benchmark. If 500 of the 600 returned values from a total sample of 1000 properties met the user’s definition of an acceptable valuation, then the usable hit rate would be expressed as 500/1000 or 50%.
- Usage RulesRules that establish when a particular AVM is appropriate for use. These policies frequently include property and transaction-related restrictions (e.g., FICO score, LTV, etc.).
- Use Class(1) A grouping of properties based on their use rather than, for example, their acreage or construction. (2) One of the following classes of property: single-family residential, multifamily residential, agricultural, commercial, industrial, vacant land, and institutional/exempt. (3) Any subclass refinement of the above for example, townhouse, detached single-family, condominium, house on a farm, and so on. See property use category.
- Use CodeA code (used on a property record form) to indicate a property's use class or, less often, potential use.
- Use, Highest and BestSee highest and best use.
- Use Value(1) The value of property in a specific use. (2) Property entirely used for a specific purpose or use that may entitle the property to be assessed at a different level than others in the jurisdiction. Examples of properties that may be assessed at use value under the statutes include agricultural land, timberland, and historical sites. Compare value in use.
- Useful LifeEstimated normal operating life in terms of utility to the owner of a fixed asset or group of assets.
- USPAP
- Utility(1) The quality of a property or service that enables it to satisfy human wants. (2) The satisfaction obtained from the goods and services that a consumer consumes.
- v
- ValidityThe quality of a data element or procedure being what it should be in terms of some ultimate purpose or use. See integrity. Compare accuracy, precision.
- Valuation(1) The process of estimating the value -- market, investment, insured, or other properly defined value -- of a specific parcel or parcels of real estate or of an item or items of personal property as of a given date. (2) The process or business of appraising, of making estimates of the value of something. The value usually required to be estimated is market value.
- Valuation Acceptance CriteriaCriteria for determining the acceptability of a value estimate generated by a particular AVM. These policies are model-specific and usually consider confidence score thresholds or forecast standard deviations (FSD), as well as the organization’s risk appetite.
- Valuation, AssessedSee assessed value.
- Valuation DateThe specific date as of which assessed values are set for purposes of property taxation. This date may also be known as the "date of finality." See assessment date.
- Valuation MethodA specific process used in a Model that estimates a value for a property.
- Value, ActualMarket value, especially as distinguished from the so-called book, par, or face values.
- Value, CashMarket value in terms of cash.
- Value, ExchangeSynonymous with the preferred term "market value."
- Value, FaceSee face value.
- Value, FullSynonymous with the preferred term market value.
- Value, GoingThe value of an entire property in active service and with an established clientele, as distinguished from its value immediately before being put into service or upon retirement from service.
- Value, ImprovedA loose term generally defined as that portion of the present worth of a property that represents the resale factor. (Term not recommended for use.)
- Value in Exchange(1) The amount an informed purchaser would offer for property under given market conditions. (2) The concept that states value is based on the ability of property to command another asset, such as money, in trade.
- Value in UseThe value of property for a specific use. The concept that holds value to be inherent in property itself, that is, the value is based on the ability of the asset to produce revenue through ownership.
- Value IncrementThe amount by which a property has increased in value. See increment, unearned.
- Value, Intrinsic(1) The value of an article due to its own physical qualities rather than to the rights, privileges, or immunities with respect to other properties or persons which its possession confers. (2) A term used to designate "value" that is supposed to reside within an article rather than within the minds of its actual or would - Be possessors. Note: This is a term that is much abused and that might well be discarded. Although it is proper to say that the intrinsic value of a stock certificate is the value, if any, of the paper, it is not correct to say that real estate has an intrinsic value(...)
- Value, MarketSee market value.
- Value, MoneySynonymous with the preferred term "cash value."
- Value, NormalA loose term used to denote some sort of mean between high and low market prices obtaining over a period of time or in different markets at any moment of time (a term not recommended for use).
- Value ShoppingOrdering multiple valuations of the same property and using the one with the highest value estimate to underwrite the loan—an unsafe and unsound practice.
- VariableAn item of observation that can assume various values, for example, square feet, sales prices, or sales ratios. Variables are commonly described using measures of central tendency and dispersion.
- Variable CostsThe costs of the variable resources used by a firm in either the short run or the long run.
- Variable Proportions, Law ofAlso called the "law of decreasing returns," this states that as quantities of one productive factor in crease, the quantities of other productive factors remaining fixed, the resulting additional increments of product or output will de crease after a certain point.
- VarianceA measure of dispersion equal to the standard deviation squared.
- Variation(1) A general term meaning dispersion. (2) A reference to a particular statistic called the coefficient of variation.
- VerifyTo check the accuracy of something. For example, sales data may be verified by interviewing the purchaser of the property, and data entries may be verified by check digits.
- Vertical InequityDifferences in the levels of assessment of properties related to the value ranges of the properties. That is, proper ties of higher value have assessment levels different from proper ties of lower value. See horizontal inequity.
- w
- Weighted Average MethodIn personal property appraisal, a method of inventory cost accounting whereby inventory is valued according to the unit price of all units owned throughout the year, calculated by dividing total acquisition cost of all inventory by the number of units owned.
- Weighted Coefficient of DispersionThe coefficient of dispersion when the absolute differences between individual assessment ratios and the measure of central tendency (for example, the median ratio) are weighted on the basis of the sale price.
- Weighted Coefficient of VariationThe coefficient of variation when the squared differences between individual assessment ratios and the arithmetic mean ratio are weighted on the basis of the sale price.
- Weighted MeanAn average in which each value is adjusted by a factor reflecting its relative importance in the whole before the values are summed and divided by their number.
- Weighted Mean RatioSum of the appraised values divided by the sum of the sale prices (or independent estimates of market value), which weights each ratio in proportion to the sale price (or independent estimate of market value).
- Weighted Mean; Weighted AverageAn average in which each value is adjusted by a factor reflecting its relative importance in the whole before the values are summed and divided by their number.
- Written Estimate of Market ValueFor certain transactions (e.g., those that are below the de minimis), the NCUA allows credit unions under its jurisdiction to obtain a written estimate of market value in lieu of an appraisal. According to the agency’s regulations, individuals who prepare ‘written estimates of market value’ must be sufficiently qualified; however, the agency has also opined, “an AVM can be used to meet the valuation requirement in conjunction with review by a loan officer or an individual with knowledge, training, and experience in the real estate market where the loan is being made.”
- z
- z-Statistic
- z-TableA table of critical values associated with the z-Test.
- z-TestA test of any of a number of hypotheses in inferential statistics that has validity if the sample size is sufficiently large and the underlying data are normally distributed.
- ZoningThe exercise of the police power to restrict land owners as to the use of their land and/or the type, size, and location of structures to be erected thereon.

**Sources:**

a) AVMetrics

b) AVMs 201: A Practical Guide to the Implementation of Automated Valuation Models, Jim Kirchmeyer, 2008.

c) IAAO 2015, Glossary for Property Appraisal and Assessment, 2015. (2013 online: https://www.iaao.org/media/Pubs/IAAO_GLOSSARY.pdf )

d) Collateral Assessment & Technologies Committee, Summary of Definitions & Terms, 2006.

e) Joint Industry Task Force on AVMs, IAAO Standard on AVM Glossary, September 2003. https://www.iaao.org/media/standards/AVM_STANDARD.pdf

f) Appraisal Institute, Joint Industry Task Force on Automated Valuation Models, Work Group Terminology, 2005.