AVM Glossary

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  • Hypothesis
    A 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.
  • IAAO
    International Association of Assessing Officers.
  • Improvement
    Anything 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.
  • Improvements
    Buildings, 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 Approach
    One 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.
  • Incurable
    A 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 Appraisal
    An 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 Validation
    Process/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 Variable
    A variable whose value is not determined by other (dependent) variables.
  • Index
    A 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.
  • Inelastic
  • Inferential Statistics
    The 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 Valuation
    These 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.
  • Iteration
    One 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.
  • Kilometer
    Unit of length equal to 1,000 meters. Equals 0.6214 statute miles.
  • Kruskal-Wallis Test
    A 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.
  • Land, Improved
    Land 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 of
    See parcel.
  • Law of Variable Proportions
    Often 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
    A written contract by which the lessor (owner) transfers the rights to occupy and use real or personal property to another (lessee) for a specified time in return for a specified payment (rent).
  • Legal Description
    A 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.
  • Lessee
    The person receiving a possessory interest in property by lease, that is, the owner of a leasehold estate.
  • Lessor
    The 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 Appraisal
    The 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 Ratio
    The 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, Economic
    See economic life.
  • Life, Physical
    The period over which a physical property is capable of functioning without being scrapped or reconstructed.
  • Linear Regression
    A 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 Analysis
    A 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(...)

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/)