AVM Glossary

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  • 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 Model
    An 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 Testing
    AVM 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.
  • Bootstrap
    A 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 Logic
    User-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
    The six basic rights associated with the private ownership of property: right to use; sell; rent or lease; enter or leave; give away; and refuse to do any of these.
  • Calibration
    The process of estimating the coefficients in a mass appraisal model.
  • CAMA
    See computer-assisted mass appraisal.
  • Cascade
    A 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 Price
    An 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 Variable
    A 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
    A single point in a range of observations around which the observations tend to cluster. The three most commonly used measures of central tendency are the mean, median, and mode.
  • Chi-square
    A particular statistic, and a particular frequency distribution associated with it, of interest in inferential statistics.
  • Chronological Age
    The number of years elapsed since an original structure was built. Synonyms are actual age and historical age. Contrast with effective age.
  • Cluster Analysis
    A 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 Concentration
    The 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."
  • Comp
    See Comparable
  • Comp Set
    The 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 Model
    Whether 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.
  • Condition
    A 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 Interval
    A 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.

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.

g) Merriam-Webster (https://www.merriam-webster.com/)